Correlation Between DTF Tax and GAMCO Natural

Can any of the company-specific risk be diversified away by investing in both DTF Tax 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 DTF Tax and GAMCO Natural 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 GAMCO Natural Resources, you can compare the effects of market volatilities on DTF Tax 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 DTF Tax with a short position of GAMCO Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTF Tax and GAMCO Natural.

Diversification Opportunities for DTF Tax and GAMCO Natural

0.75

Correlation Coefficient

DTF Tax  GAMCO Natural

Poor diversification

The 3 months correlation between DTF and GAMCO is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free 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 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 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 DTF Tax i.e., DTF Tax and GAMCO Natural go up and down completely randomly.

Pair Corralation between DTF Tax and GAMCO Natural

Considering the 90-day investment horizon DTF Tax is expected to generate 4.74 times less return on investment than GAMCO Natural. But when comparing it to its historical volatility, DTF Tax Free is 2.48 times less risky than GAMCO Natural. It trades about 0.12 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  531.00  in GAMCO Natural Resources on December 26, 2024 and sell it today you would earn a total of  67.00  from holding GAMCO Natural Resources or generate 12.62% return on investment over 90 days.

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

DTF Tax Free  vs.  GAMCO Natural Resources

DTF Tax Free

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DTF Tax Free are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. 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.

GAMCO Natural Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, GAMCO Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DTF Tax and GAMCO Natural

The main advantage of trading using opposite DTF Tax and GAMCO Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTF Tax 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 DTF Tax Free 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.