Correlation Between Gmo High and Prudential High
Can any of the company-specific risk be diversified away by investing in both Gmo High and Prudential High 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 High and Prudential High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Prudential High Yield, you can compare the effects of market volatilities on Gmo High and Prudential High 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 High with a short position of Prudential High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Prudential High.
Diversification Opportunities for Gmo High and Prudential High
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gmo and Prudential is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Prudential High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential High Yield and Gmo High 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 High Yield are associated (or correlated) with Prudential High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential High Yield has no effect on the direction of Gmo High i.e., Gmo High and Prudential High go up and down completely randomly.
Pair Corralation between Gmo High and Prudential High
Assuming the 90 days horizon Gmo High Yield is expected to under-perform the Prudential High. In addition to that, Gmo High is 1.02 times more volatile than Prudential High Yield. It trades about -0.23 of its total potential returns per unit of risk. Prudential High Yield is currently generating about -0.23 per unit of volatility. If you would invest 471.00 in Prudential High Yield on January 24, 2024 and sell it today you would lose (6.00) from holding Prudential High Yield or give up 1.27% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Gmo High Yield vs. Prudential High Yield
Performance |
Timeline |
Gmo High Yield |
Prudential High Yield |
Gmo High and Prudential High Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gmo High and Prudential High
The main advantage of trading using opposite Gmo High and Prudential High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Prudential High 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 Prudential High will offset losses from the drop in Prudential High's long position.Gmo High vs. Gmo E Plus | Gmo High vs. Gmo Treasury Fund | Gmo High vs. Gmo Trust | Gmo High vs. Gmo Emerging Markets |
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 the Transaction History module to view history of all your transactions and understand their impact on performance.
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