Correlation Between GMO Opportunistic and Walmart

Can any of the company-specific risk be diversified away by investing in both GMO Opportunistic and Walmart at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GMO Opportunistic and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GMO Opportunistic Income and Walmart, you can compare the effects of market volatilities on GMO Opportunistic and Walmart and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GMO Opportunistic with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Opportunistic and Walmart.

Diversification Opportunities for GMO Opportunistic and Walmart

-0.39

Correlation Coefficient

GMO Opportunistic Walmart

Very good diversification

The 3 months correlation between GAAAX and Walmart is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding GMO Opportunistic Income and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and GMO Opportunistic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GMO Opportunistic Income are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of GMO Opportunistic i.e., GMO Opportunistic and Walmart go up and down completely randomly.

Pair Corralation between GMO Opportunistic and Walmart

Assuming the 90 days horizon GMO Opportunistic Income is expected to generate 0.22 times more return on investment than Walmart. However, GMO Opportunistic Income is 4.6 times less risky than Walmart. It trades about 0.2 of its potential returns per unit of risk. Walmart is currently generating about -0.23 per unit of risk. If you would invest  2,402  in GMO Opportunistic Income on December 21, 2022 and sell it today you would earn a total of  18.00  from holding GMO Opportunistic Income or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GMO Opportunistic Income  vs.  Walmart

GMO Opportunistic Income

GAAAX Performance

15 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Opportunistic Income are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, GMO Opportunistic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Walmart

Walmart Performance

0 of 100

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GMO Opportunistic and Walmart

The main advantage of trading using opposite GMO Opportunistic and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Opportunistic position performs unexpectedly, Walmart can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Walmart will offset losses from the drop in Walmart's long position.

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The idea behind GMO Opportunistic Income and Walmart pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.