Correlation Between First Trust and Gamco Global

Can any of the company-specific risk be diversified away by investing in both First Trust and Gamco Global 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 First Trust and Gamco Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for First Trust and Gamco Global

0.12

Correlation Coefficient

First Trust  Gamco Global

Average diversification

The 3 months correlation between First and Gamco is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Senior and Gamco Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Global and First Trust 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 First Trust Senior are associated (or correlated) with Gamco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Global has no effect on the direction of First Trust i.e., First Trust and Gamco Global go up and down completely randomly.

Pair Corralation between First Trust and Gamco Global

Considering the 90-day investment horizon First Trust is expected to generate 32.99 times less return on investment than Gamco Global. But when comparing it to its historical volatility, First Trust Senior is 2.31 times less risky than Gamco Global. It trades about 0.02 of its potential returns per unit of risk. Gamco Global is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  376.00  in Gamco Global on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Gamco Global or generate 15.43% return on investment over 90 days.

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

First Trust Senior  vs.  Gamco Global

First Trust Senior

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Gamco Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Global are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak technical and fundamental indicators, Gamco Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Gamco Global

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

The idea behind First Trust Senior and Gamco Global 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.