Correlation Between Smallcap World and Gmo Global
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Gmo Global 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 Smallcap World and Gmo Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Gmo Global Equity, you can compare the effects of market volatilities on Smallcap World and Gmo Global 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 Smallcap World with a short position of Gmo Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Gmo Global.
Diversification Opportunities for Smallcap World and Gmo Global
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Smallcap and Gmo is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Gmo Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Global Equity and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Gmo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Global Equity has no effect on the direction of Smallcap World i.e., Smallcap World and Gmo Global go up and down completely randomly.
Pair Corralation between Smallcap World and Gmo Global
Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.1 times more return on investment than Gmo Global. However, Smallcap World is 1.1 times more volatile than Gmo Global Equity. It trades about 0.08 of its potential returns per unit of risk. Gmo Global Equity is currently generating about 0.06 per unit of risk. If you would invest 6,554 in Smallcap World Fund on March 16, 2025 and sell it today you would earn a total of 479.00 from holding Smallcap World Fund or generate 7.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Gmo Global Equity
Performance |
| Timeline |
| Smallcap World |
| Gmo Global Equity |
Smallcap World and Gmo Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Gmo Global
The main advantage of trading using opposite Smallcap World and Gmo Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Gmo Global 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 Global will offset losses from the drop in Gmo Global's long position.| Smallcap World vs. Ab Bond Inflation | Smallcap World vs. Ab Bond Inflation | Smallcap World vs. Pimco Inflation Response | Smallcap World vs. Cref Inflation Linked Bond |
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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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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