Correlation Between Gabelli Small and Gabelli Growth

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

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

Diversification Opportunities for Gabelli Small and Gabelli Growth

0.11

Correlation Coefficient

Gabelli Small  Gabelli Growth

Average diversification

The 3 months correlation between Gabelli and Gabelli is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Small and The Gabelli Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Growth and Gabelli Small 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 Small are associated (or correlated) with Gabelli Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Growth has no effect on the direction of Gabelli Small i.e., Gabelli Small and Gabelli Growth go up and down completely randomly.

Pair Corralation between Gabelli Small and Gabelli Growth

Assuming the 90 days horizon Gabelli Small is expected to generate 43.29 times less return on investment than Gabelli Growth. But when comparing it to its historical volatility, The Gabelli Small is 1.08 times less risky than Gabelli Growth. It trades about 0.0 of its potential returns per unit of risk. The Gabelli Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,163  in The Gabelli Growth on October 8, 2024 and sell it today you would earn a total of  1,300  from holding The Gabelli Growth or generate 12.79% return on investment over 90 days.

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

The Gabelli Small  vs.  The Gabelli Growth

Gabelli Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gabelli Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gabelli Growth 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 Small and Gabelli Growth

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

The idea behind The Gabelli Small and The Gabelli Growth 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.