Correlation Between Gamco Global and Brandes International

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

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

Diversification Opportunities for Gamco Global and Brandes International

0.63

Correlation Coefficient

Gamco Global  Brandes International

Poor diversification

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

Pair Corralation between Gamco Global and Brandes International

Assuming the 90 days horizon Gamco Global is expected to generate 2.23 times less return on investment than Brandes International. But when comparing it to its historical volatility, Gamco Global Telecommunications is 1.08 times less risky than Brandes International. It trades about 0.12 of its potential returns per unit of risk. Brandes International Small is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,846  in Brandes International Small on December 28, 2024 and sell it today you would earn a total of  239.00  from holding Brandes International Small or generate 12.95% return on investment over 90 days.

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

Gamco Global Telecommunication  vs.  Brandes International Small

Gamco Global Telecom

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Global Telecommunications are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gamco Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brandes International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brandes International Small are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Brandes International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gamco Global and Brandes International

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

The idea behind Gamco Global Telecommunications and Brandes International Small 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.