Correlation Between Gmo E and Wesmark Government

Can any of the company-specific risk be diversified away by investing in both Gmo E and Wesmark Government 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 Wesmark Government 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 Wesmark Government Bond, you can compare the effects of market volatilities on Gmo E and Wesmark Government 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 Wesmark Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo E and Wesmark Government.

Diversification Opportunities for Gmo E and Wesmark Government

0.99

Correlation Coefficient

Gmo E  Wesmark Government

No risk reduction

The 3 months correlation between Gmo and Wesmark is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus and Wesmark Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesmark Government Bond 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 Wesmark Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesmark Government Bond has no effect on the direction of Gmo E i.e., Gmo E and Wesmark Government go up and down completely randomly.

Pair Corralation between Gmo E and Wesmark Government

Assuming the 90 days horizon Gmo E Plus is expected to generate 0.92 times more return on investment than Wesmark Government. However, Gmo E Plus is 1.09 times less risky than Wesmark Government. It trades about -0.09 of its potential returns per unit of risk. Wesmark Government Bond is currently generating about -0.1 per unit of risk. If you would invest  1,831  in Gmo E Plus on September 12, 2024 and sell it today you would lose (30.00) from holding Gmo E Plus or give up 1.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Gmo E Plus  vs.  Wesmark Government Bond

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.

Wesmark Government Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wesmark Government Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Wesmark Government 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 E and Wesmark Government

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

The idea behind Gmo E Plus and Wesmark Government Bond 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.