Correlation Between The Gabelli and Towpath Technology

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

Diversification Opportunities for The Gabelli and Towpath Technology

0.25

Correlation Coefficient

The Gabelli  Towpath Technology

Modest diversification

The 3 months correlation between The and Towpath is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Small and Towpath Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Towpath Technology 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 Small are associated (or correlated) with Towpath Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Towpath Technology has no effect on the direction of The Gabelli i.e., The Gabelli and Towpath Technology go up and down completely randomly.

Pair Corralation between The Gabelli and Towpath Technology

Assuming the 90 days horizon The Gabelli Small is expected to under-perform the Towpath Technology. In addition to that, The Gabelli is 1.19 times more volatile than Towpath Technology. It trades about -0.15 of its total potential returns per unit of risk. Towpath Technology is currently generating about -0.01 per unit of volatility. If you would invest  1,407  in Towpath Technology on December 2, 2024 and sell it today you would lose (10.00) from holding Towpath Technology or give up 0.71% of portfolio value over 90 days.

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

The Gabelli Small  vs.  Towpath Technology

Gabelli Small

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Towpath Technology

Risk-Adjusted Performance

Very Weak

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

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

The idea behind The Gabelli Small and Towpath Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.