Correlation Between Small Cap and Gmo Quality
Can any of the company-specific risk be diversified away by investing in both Small Cap and Gmo Quality 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 Small Cap and Gmo Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Gmo Quality Fund, you can compare the effects of market volatilities on Small Cap and Gmo Quality 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 Small Cap with a short position of Gmo Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Gmo Quality.
Diversification Opportunities for Small Cap and Gmo Quality
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Gmo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Gmo Quality Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Quality Fund and Small Cap 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 Small Cap Stock are associated (or correlated) with Gmo Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Quality Fund has no effect on the direction of Small Cap i.e., Small Cap and Gmo Quality go up and down completely randomly.
Pair Corralation between Small Cap and Gmo Quality
Assuming the 90 days horizon Small Cap Stock is expected to generate 2.39 times more return on investment than Gmo Quality. However, Small Cap is 2.39 times more volatile than Gmo Quality Fund. It trades about 0.31 of its potential returns per unit of risk. Gmo Quality Fund is currently generating about 0.25 per unit of risk. If you would invest 1,312 in Small Cap Stock on June 10, 2025 and sell it today you would earn a total of 104.00 from holding Small Cap Stock or generate 7.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Gmo Quality Fund
Performance |
| Timeline |
| Small Cap Stock |
| Gmo Quality Fund |
Small Cap and Gmo Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Gmo Quality
The main advantage of trading using opposite Small Cap and Gmo Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Gmo Quality 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 Quality will offset losses from the drop in Gmo Quality's long position.| Small Cap vs. Short Duration Inflation | Small Cap vs. Vy Blackrock Inflation | Small Cap vs. Ab Bond Inflation | Small Cap vs. Lord Abbett Inflation |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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