Correlation Between Liberty All and Gabelli Equity

Can any of the company-specific risk be diversified away by investing in both Liberty All and Gabelli Equity 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 Liberty All and Gabelli Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Liberty All Star and Gabelli Equity Trust, you can compare the effects of market volatilities on Liberty All and Gabelli Equity 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 Liberty All with a short position of Gabelli Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty All and Gabelli Equity.

Diversification Opportunities for Liberty All and Gabelli Equity

0.87

Correlation Coefficient

Liberty All  Gabelli Equity

Very poor diversification

The 3 months correlation between Liberty and Gabelli is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and Gabelli Equity Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity Trust and Liberty All 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 Liberty All Star are associated (or correlated) with Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity Trust has no effect on the direction of Liberty All i.e., Liberty All and Gabelli Equity go up and down completely randomly.

Pair Corralation between Liberty All and Gabelli Equity

Considering the 90-day investment horizon Liberty All Star is expected to under-perform the Gabelli Equity. But the fund apears to be less risky and, when comparing its historical volatility, Liberty All Star is 1.06 times less risky than Gabelli Equity. The fund trades about -0.07 of its potential returns per unit of risk. The Gabelli Equity Trust is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  554.00  in Gabelli Equity Trust on September 23, 2024 and sell it today you would lose (4.00) from holding Gabelli Equity Trust or give up 0.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Liberty All Star  vs.  Gabelli Equity Trust

Liberty All Star

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Liberty All is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gabelli Equity Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Gabelli Equity is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Liberty All and Gabelli Equity

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

The idea behind Liberty All Star and Gabelli Equity Trust 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.