Correlation Between Gmo Small and 13d Activist

Can any of the company-specific risk be diversified away by investing in both Gmo Small and 13d Activist 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 Small and 13d Activist into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gmo Small Cap and 13d Activist Fund, you can compare the effects of market volatilities on Gmo Small and 13d Activist 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 Small with a short position of 13d Activist. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Small and 13d Activist.

Diversification Opportunities for Gmo Small and 13d Activist

0.81

Correlation Coefficient

Gmo Small  13d Activist

Very poor diversification

The 3 months correlation between Gmo and 13d is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Small Cap and 13d Activist Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 13d Activist and Gmo Small 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 Small Cap are associated (or correlated) with 13d Activist. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 13d Activist has no effect on the direction of Gmo Small i.e., Gmo Small and 13d Activist go up and down completely randomly.

Pair Corralation between Gmo Small and 13d Activist

Assuming the 90 days horizon Gmo Small Cap is expected to generate 1.18 times more return on investment than 13d Activist. However, Gmo Small is 1.18 times more volatile than 13d Activist Fund. It trades about 0.0 of its potential returns per unit of risk. 13d Activist Fund is currently generating about 0.0 per unit of risk. If you would invest  2,563  in Gmo Small Cap on September 17, 2024 and sell it today you would lose (9.00) from holding Gmo Small Cap or give up 0.35% of portfolio value over 90 days.

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

Gmo Small Cap  vs.  13d Activist Fund

Gmo Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

13d Activist

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 13d Activist Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, 13d Activist 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 Small and 13d Activist

The main advantage of trading using opposite Gmo Small and 13d Activist positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Small position performs unexpectedly, 13d Activist 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 13d Activist will offset losses from the drop in 13d Activist's long position.

The idea behind Gmo Small Cap and 13d Activist Fund 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.