Correlation Between Gmo High and Large Cap
Can any of the company-specific risk be diversified away by investing in both Gmo High and Large Cap 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 High and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gmo High Yield and Large Cap Value, you can compare the effects of market volatilities on Gmo High and Large Cap 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 High with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo High and Large Cap.
Diversification Opportunities for Gmo High and Large Cap
Very poor diversification
The 3 months correlation between Gmo and Large is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gmo High Yield and Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value and Gmo High 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 High Yield are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of Gmo High i.e., Gmo High and Large Cap go up and down completely randomly.
Pair Corralation between Gmo High and Large Cap
Assuming the 90 days horizon Gmo High is expected to generate 1.76 times less return on investment than Large Cap. But when comparing it to its historical volatility, Gmo High Yield is 5.39 times less risky than Large Cap. It trades about 0.16 of its potential returns per unit of risk. Large Cap Value is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,997 in Large Cap Value on June 12, 2025 and sell it today you would earn a total of 669.00 from holding Large Cap Value or generate 33.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gmo High Yield vs. Large Cap Value
Performance |
| Timeline |
| Gmo High Yield |
| Large Cap Value |
Gmo High and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gmo High and Large Cap
The main advantage of trading using opposite Gmo High and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo High position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.| Gmo High vs. T Rowe Price | Gmo High vs. T Rowe Price | Gmo High vs. Tfa Alphagen Growth | Gmo High vs. Ultra Short Fixed Income |
| Large Cap vs. Pace Smallmedium Value | Large Cap vs. Omni Small Cap Value | Large Cap vs. Lsv Small Cap | Large Cap vs. Fidelity Small Cap |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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