Correlation Between Gabelli Small and Aig Government

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

Diversification Opportunities for Gabelli Small and Aig Government

0.63

Correlation Coefficient

Gabelli Small  Aig Government

Poor diversification

The 3 months correlation between Gabelli and Aig is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Small and Aig Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aig Government Money 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 Aig Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aig Government Money has no effect on the direction of Gabelli Small i.e., Gabelli Small and Aig Government go up and down completely randomly.

Pair Corralation between Gabelli Small and Aig Government

Assuming the 90 days horizon The Gabelli Small is expected to generate 6.31 times more return on investment than Aig Government. However, Gabelli Small is 6.31 times more volatile than Aig Government Money. It trades about 0.03 of its potential returns per unit of risk. Aig Government Money is currently generating about 0.01 per unit of risk. If you would invest  4,075  in The Gabelli Small on October 7, 2024 and sell it today you would earn a total of  271.00  from holding The Gabelli Small or generate 6.65% return on investment over 90 days.

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

The Gabelli Small  vs.  Aig Government Money

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.

Aig Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aig Government Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aig Government 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 Aig Government

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

The idea behind The Gabelli Small and Aig Government Money 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.