Correlation Between Gmo Trust and Gmo International

Can any of the company-specific risk be diversified away by investing in both Gmo Trust and Gmo International 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 Trust and Gmo International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gmo Trust and Gmo International Equity, you can compare the effects of market volatilities on Gmo Trust and Gmo International 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 Trust with a short position of Gmo International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Trust and Gmo International.

Diversification Opportunities for Gmo Trust and Gmo International

0.67

Correlation Coefficient

Gmo Trust  Gmo International

Poor diversification

The 3 months correlation between Gmo and Gmo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Trust and Gmo International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo International Equity and Gmo Trust 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 Trust are associated (or correlated) with Gmo International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo International Equity has no effect on the direction of Gmo Trust i.e., Gmo Trust and Gmo International go up and down completely randomly.

Pair Corralation between Gmo Trust and Gmo International

Assuming the 90 days horizon Gmo Trust is expected to generate 1.25 times more return on investment than Gmo International. However, Gmo Trust is 1.25 times more volatile than Gmo International Equity. It trades about 0.11 of its potential returns per unit of risk. Gmo International Equity is currently generating about 0.04 per unit of risk. If you would invest  2,197  in Gmo Trust on January 31, 2024 and sell it today you would earn a total of  46.00  from holding Gmo Trust or generate 2.09% return on investment over 90 days.

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

Gmo Trust   vs.  Gmo International Equity

Gmo Trust

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Trust are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Gmo Trust may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Gmo International Equity

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo International Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gmo Trust and Gmo International

The main advantage of trading using opposite Gmo Trust and Gmo International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Trust position performs unexpectedly, Gmo International 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 Gmo International will offset losses from the drop in Gmo International's long position.

The idea behind Gmo Trust and Gmo International Equity 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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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 the CEOs Directory module to screen CEOs from public companies around the world.