Correlation Between Gabelli Equity and Pax Balanced

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

Diversification Opportunities for Gabelli Equity and Pax Balanced

0.7

Correlation Coefficient

Gabelli Equity  Pax Balanced

Poor diversification

The 3 months correlation between Gabelli and Pax is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced 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 Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and Pax Balanced go up and down completely randomly.

Pair Corralation between Gabelli Equity and Pax Balanced

Assuming the 90 days horizon Gabelli Equity is expected to generate 1.06 times less return on investment than Pax Balanced. In addition to that, Gabelli Equity is 1.46 times more volatile than Pax Balanced Fund. It trades about 0.03 of its total potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.05 per unit of volatility. If you would invest  2,301  in Pax Balanced Fund on October 7, 2024 and sell it today you would earn a total of  293.00  from holding Pax Balanced Fund or generate 12.73% return on investment over 90 days.

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

The Gabelli Equity  vs.  Pax Balanced Fund

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 fund investors. In spite of fairly strong technical and fundamental indicators, Gabelli Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pax Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gabelli Equity and Pax Balanced

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

The idea behind The Gabelli Equity and Pax Balanced Fund 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.