Correlation Between Gmo E and Congress Large

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

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

Diversification Opportunities for Gmo E and Congress Large

-0.57

Correlation Coefficient

Gmo E  Congress Large

Excellent diversification

The 3 months correlation between Gmo and Congress is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Congress Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Congress Large Cap and Gmo E 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 E Plus are associated (or correlated) with Congress Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Congress Large Cap has no effect on the direction of Gmo E i.e., Gmo E and Congress Large go up and down completely randomly.

Pair Corralation between Gmo E and Congress Large

Assuming the 90 days horizon Gmo E is expected to generate 5.72 times less return on investment than Congress Large. But when comparing it to its historical volatility, Gmo E Plus is 2.62 times less risky than Congress Large. It trades about 0.05 of its potential returns per unit of risk. Congress Large Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,064  in Congress Large Cap on September 12, 2024 and sell it today you would earn a total of  1,047  from holding Congress Large Cap or generate 25.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Gmo E Plus  vs.  Congress Large Cap

Gmo E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Congress Large Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Congress Large Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Congress Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gmo E and Congress Large

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

The idea behind Gmo E Plus and Congress Large Cap 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.