Correlation Between General American and Gabelli Multimedia

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

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

Diversification Opportunities for General American and Gabelli Multimedia

0.17

Correlation Coefficient

General American  Gabelli Multimedia

Average diversification

The 3 months correlation between General and Gabelli is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and The Gabelli Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Multimedia and General American 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 General American Investors are associated (or correlated) with Gabelli Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Multimedia has no effect on the direction of General American i.e., General American and Gabelli Multimedia go up and down completely randomly.

Pair Corralation between General American and Gabelli Multimedia

Assuming the 90 days trading horizon General American is expected to generate 1.35 times less return on investment than Gabelli Multimedia. But when comparing it to its historical volatility, General American Investors is 1.34 times less risky than Gabelli Multimedia. It trades about 0.06 of its potential returns per unit of risk. The Gabelli Multimedia is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,189  in The Gabelli Multimedia on September 23, 2024 and sell it today you would earn a total of  101.00  from holding The Gabelli Multimedia or generate 4.61% return on investment over 90 days.

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

General American Investors  vs.  The Gabelli Multimedia

General American Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General American Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, General American is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

The Gabelli Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gabelli Multimedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with General American and Gabelli Multimedia

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

The idea behind General American Investors and The Gabelli Multimedia 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..