Correlation Between Small Company and The Gabelli

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

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

Diversification Opportunities for Small Company and The Gabelli

0.66

Correlation Coefficient

Small Company  The Gabelli

Poor diversification

The 3 months correlation between Small and The is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and The Gabelli Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Growth and Small Company 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 Small Pany Growth are associated (or correlated) with The Gabelli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Growth has no effect on the direction of Small Company i.e., Small Company and The Gabelli go up and down completely randomly.

Pair Corralation between Small Company and The Gabelli

Assuming the 90 days horizon Small Pany Growth is expected to under-perform the The Gabelli. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Pany Growth is 1.35 times less risky than The Gabelli. The mutual fund trades about -0.16 of its potential returns per unit of risk. The The Gabelli Growth is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  11,904  in The Gabelli Growth on December 2, 2024 and sell it today you would lose (781.00) from holding The Gabelli Growth or give up 6.56% of portfolio value over 90 days.

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

Small Pany Growth  vs.  The Gabelli Growth

Small Pany Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Gabelli Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gabelli Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, The Gabelli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Company and The Gabelli

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

The idea behind Small Pany Growth and The Gabelli Growth 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.