Correlation Between DTF Tax and Gabelli Equity

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

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

Diversification Opportunities for DTF Tax and Gabelli Equity

-0.36

Correlation Coefficient

DTF Tax  Gabelli Equity

Very good diversification

The 3 months correlation between DTF and Gabelli is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and DTF Tax 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 DTF Tax Free 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 has no effect on the direction of DTF Tax i.e., DTF Tax and Gabelli Equity go up and down completely randomly.

Pair Corralation between DTF Tax and Gabelli Equity

Considering the 90-day investment horizon DTF Tax Free is expected to generate 0.52 times more return on investment than Gabelli Equity. However, DTF Tax Free is 1.94 times less risky than Gabelli Equity. It trades about -0.2 of its potential returns per unit of risk. The Gabelli Equity is currently generating about -0.21 per unit of risk. If you would invest  1,125  in DTF Tax Free on September 21, 2024 and sell it today you would lose (21.00) from holding DTF Tax Free or give up 1.87% of portfolio value over 90 days.

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

DTF Tax Free  vs.  The Gabelli Equity

DTF Tax Free

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days DTF Tax Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Preferred Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with DTF Tax and Gabelli Equity

The main advantage of trading using opposite DTF Tax and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTF Tax 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 DTF Tax Free and The Gabelli Equity 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.