Correlation Between CP ALL and GAMCO Natural

Can any of the company-specific risk be diversified away by investing in both CP ALL and GAMCO Natural 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 CP ALL and GAMCO Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CP ALL Public and GAMCO Natural Resources, you can compare the effects of market volatilities on CP ALL and GAMCO Natural 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 CP ALL with a short position of GAMCO Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and GAMCO Natural.

Diversification Opportunities for CP ALL and GAMCO Natural

0.77

Correlation Coefficient

CP ALL  GAMCO Natural

Poor diversification

The 3 months correlation between CVPBF and GAMCO is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources and CP 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 CP ALL Public are associated (or correlated) with GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of CP ALL i.e., CP ALL and GAMCO Natural go up and down completely randomly.

Pair Corralation between CP ALL and GAMCO Natural

Assuming the 90 days horizon CP ALL Public is expected to generate 4.98 times more return on investment than GAMCO Natural. However, CP ALL is 4.98 times more volatile than GAMCO Natural Resources. It trades about 0.01 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about 0.01 per unit of risk. If you would invest  194.00  in CP ALL Public on October 3, 2024 and sell it today you would lose (14.00) from holding CP ALL Public or give up 7.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	64.63%
Values	Daily Returns

CP ALL Public  vs.  GAMCO Natural Resources

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CP ALL and GAMCO Natural

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

The idea behind CP ALL Public and GAMCO Natural Resources 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.