Correlation Between The Gabelli and Third Avenue

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

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

Diversification Opportunities for The Gabelli and Third Avenue

-0.27

Correlation Coefficient

The Gabelli  Third Avenue

Very good diversification

The 3 months correlation between The and Third is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Asset and Third Avenue Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Avenue Value and The Gabelli 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 Asset are associated (or correlated) with Third Avenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Avenue Value has no effect on the direction of The Gabelli i.e., The Gabelli and Third Avenue go up and down completely randomly.

Pair Corralation between The Gabelli and Third Avenue

Assuming the 90 days horizon The Gabelli Asset is expected to generate 0.75 times more return on investment than Third Avenue. However, The Gabelli Asset is 1.33 times less risky than Third Avenue. It trades about 0.16 of its potential returns per unit of risk. Third Avenue Value is currently generating about -0.06 per unit of risk. If you would invest  5,209  in The Gabelli Asset on September 3, 2024 and sell it today you would earn a total of  376.00  from holding The Gabelli Asset or generate 7.22% return on investment over 90 days.

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

The Gabelli Asset  vs.  Third Avenue Value

Gabelli Asset

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Asset are ranked lower than 12 (%) 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.

Third Avenue Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Gabelli and Third Avenue

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

The idea behind The Gabelli Asset and Third Avenue Value 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.