Correlation Between NYSE Composite and GMO Opportunistic

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and GMO Opportunistic 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 NYSE Composite and GMO Opportunistic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and GMO Opportunistic Income, you can compare the effects of market volatilities on NYSE Composite and GMO Opportunistic 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 NYSE Composite with a short position of GMO Opportunistic. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and GMO Opportunistic.

Diversification Opportunities for NYSE Composite and GMO Opportunistic

  Correlation Coefficient

Modest diversification

The 3 months correlation between NYSE Composite and GAAAX is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and GMO Opportunistic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Opportunistic Income and NYSE Composite 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 NYSE Composite are associated (or correlated) with GMO Opportunistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Opportunistic Income has no effect on the direction of NYSE Composite i.e., NYSE Composite and GMO Opportunistic go up and down completely randomly.

Pair Corralation between NYSE Composite and GMO Opportunistic

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the GMO Opportunistic. In addition to that, NYSE Composite is 5.42 times more volatile than GMO Opportunistic Income. It trades about -0.22 of its total potential returns per unit of risk. GMO Opportunistic Income is currently generating about 0.19 per unit of volatility. If you would invest  2,402  in GMO Opportunistic Income on December 23, 2022 and sell it today you would earn a total of  21.00  from holding GMO Opportunistic Income or generate 0.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

NYSE Composite  vs.  GMO Opportunistic Income

 Performance (%) 

NYSE Composite and GMO Opportunistic Volatility Contrast

   Predicted Return Density   

Pair Trading with NYSE Composite and GMO Opportunistic

The main advantage of trading using opposite NYSE Composite and GMO Opportunistic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, GMO Opportunistic 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 Opportunistic will offset losses from the drop in GMO Opportunistic's long position.
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The idea behind NYSE Composite and GMO Opportunistic Income 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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