Correlation Between Large Cap and The Gabelli

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

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

Diversification Opportunities for Large Cap and The Gabelli

0.77

Correlation Coefficient

Large Cap  The Gabelli

Poor diversification

The 3 months correlation between Large and The is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund and The Gabelli Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Small and Large Cap 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 Large Cap Fund 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 Small has no effect on the direction of Large Cap i.e., Large Cap and The Gabelli go up and down completely randomly.

Pair Corralation between Large Cap and The Gabelli

Assuming the 90 days horizon Large Cap is expected to generate 1.04 times less return on investment than The Gabelli. But when comparing it to its historical volatility, Large Cap Fund is 1.91 times less risky than The Gabelli. It trades about 0.15 of its potential returns per unit of risk. The Gabelli Small is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,431  in The Gabelli Small on September 5, 2024 and sell it today you would earn a total of  291.00  from holding The Gabelli Small or generate 6.57% return on investment over 90 days.

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

Large Cap Fund  vs.  The Gabelli Small

Large Cap Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gabelli Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Small are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, The Gabelli may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Large Cap and The Gabelli

The main advantage of trading using opposite Large Cap and The Gabelli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Fund and The Gabelli Small 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.