Correlation Between Gabelli Equity and New America

Can any of the company-specific risk be diversified away by investing in both Gabelli Equity and New America 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 New America 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 New America High, you can compare the effects of market volatilities on Gabelli Equity and New America 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 New America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Equity and New America.

Diversification Opportunities for Gabelli Equity and New America

0.21

Correlation Coefficient

Gabelli Equity  New America

Modest diversification

The 3 months correlation between Gabelli and New is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity and New America High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New America High 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 New America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New America High has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and New America go up and down completely randomly.

Pair Corralation between Gabelli Equity and New America

Assuming the 90 days trading horizon The Gabelli Equity is expected to generate 1.22 times more return on investment than New America. However, Gabelli Equity is 1.22 times more volatile than New America High. It trades about 0.11 of its potential returns per unit of risk. New America High is currently generating about 0.06 per unit of risk. If you would invest  2,217  in The Gabelli Equity on September 4, 2024 and sell it today you would earn a total of  93.00  from holding The Gabelli Equity or generate 4.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

The Gabelli Equity  vs.  New America High

Gabelli Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Equity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Gabelli Equity is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

New America High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New America High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, New America is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gabelli Equity and New America

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

The idea behind The Gabelli Equity and New America High 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.