Correlation Between Gabelli Equity and General American

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

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

Diversification Opportunities for Gabelli Equity and General American

0.45

Correlation Coefficient

Gabelli Equity  General American

Very weak diversification

The 3 months correlation between Gabelli and General is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity and General American Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General American Inv and Gabelli Equity 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 The Gabelli Equity are associated (or correlated) with General American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General American Inv has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and General American go up and down completely randomly.

Pair Corralation between Gabelli Equity and General American

Assuming the 90 days trading horizon The Gabelli Equity is expected to generate 1.76 times more return on investment than General American. However, Gabelli Equity is 1.76 times more volatile than General American Investors. It trades about 0.04 of its potential returns per unit of risk. General American Investors is currently generating about 0.06 per unit of risk. If you would invest  2,054  in The Gabelli Equity on September 22, 2024 and sell it today you would earn a total of  89.00  from holding The Gabelli Equity or generate 4.33% return on investment over 90 days.

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

The Gabelli Equity  vs.  General American Investors

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 inconsistent performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

General American Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General American Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, General American is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gabelli Equity and General American

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

The idea behind The Gabelli Equity and General American Investors 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.