Correlation Between Central Securities and Gabelli Equity

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

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

Diversification Opportunities for Central Securities and Gabelli Equity

0.3

Correlation Coefficient

Central Securities  Gabelli Equity

Weak diversification

The 3 months correlation between Central and Gabelli is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Central Securities 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 Central Securities 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 Central Securities 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 Central Securities i.e., Central Securities and Gabelli Equity go up and down completely randomly.

Pair Corralation between Central Securities and Gabelli Equity

Considering the 90-day investment horizon Central Securities is expected to under-perform the Gabelli Equity. But the stock apears to be less risky and, when comparing its historical volatility, Central Securities is 1.28 times less risky than Gabelli Equity. The stock trades about -0.02 of its potential returns per unit of risk. The Gabelli Equity Trust is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  523.00  in Gabelli Equity Trust on December 28, 2024 and sell it today you would earn a total of  27.00  from holding Gabelli Equity Trust or generate 5.16% return on investment over 90 days.

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

Central Securities  vs.  Gabelli Equity Trust

Central Securities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Central Securities is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Gabelli Equity Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 7 (%) 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 Central Securities and Gabelli Equity

The main advantage of trading using opposite Central Securities and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Securities 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 Central Securities 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.