Correlation Between Gmo Alternative and Shenkman Short

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

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

Diversification Opportunities for Gmo Alternative and Shenkman Short

-0.6

Correlation Coefficient

Gmo Alternative  Shenkman Short

Excellent diversification

The 3 months correlation between Gmo and Shenkman is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation and Shenkman Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenkman Short Duration and Gmo Alternative 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 Alternative Allocation are associated (or correlated) with Shenkman Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenkman Short Duration has no effect on the direction of Gmo Alternative i.e., Gmo Alternative and Shenkman Short go up and down completely randomly.

Pair Corralation between Gmo Alternative and Shenkman Short

Assuming the 90 days horizon Gmo Alternative Allocation is expected to under-perform the Shenkman Short. In addition to that, Gmo Alternative is 3.44 times more volatile than Shenkman Short Duration. It trades about -0.3 of its total potential returns per unit of risk. Shenkman Short Duration is currently generating about 0.1 per unit of volatility. If you would invest  979.00  in Shenkman Short Duration on September 5, 2024 and sell it today you would earn a total of  4.00  from holding Shenkman Short Duration or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Gmo Alternative Allocation  vs.  Shenkman Short Duration

Gmo Alternative Allo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gmo Alternative Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gmo Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenkman Short Duration

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenkman Short Duration are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Shenkman Short 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 Alternative and Shenkman Short

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

The idea behind Gmo Alternative Allocation and Shenkman Short Duration 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.