Correlation Between The Gabelli and Americafirst Defensive

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

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

Diversification Opportunities for The Gabelli and Americafirst Defensive

0.71

Correlation Coefficient

The Gabelli  Americafirst Defensive

Poor diversification

The 3 months correlation between The and Americafirst is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity and Americafirst Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americafirst Defensive 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 Equity are associated (or correlated) with Americafirst Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americafirst Defensive has no effect on the direction of The Gabelli i.e., The Gabelli and Americafirst Defensive go up and down completely randomly.

Pair Corralation between The Gabelli and Americafirst Defensive

Assuming the 90 days horizon The Gabelli Equity is expected to under-perform the Americafirst Defensive. In addition to that, The Gabelli is 3.06 times more volatile than Americafirst Defensive Growth. It trades about -0.06 of its total potential returns per unit of risk. Americafirst Defensive Growth is currently generating about -0.03 per unit of volatility. If you would invest  796.00  in Americafirst Defensive Growth on December 2, 2024 and sell it today you would lose (4.00) from holding Americafirst Defensive Growth or give up 0.5% of portfolio value over 90 days.

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

The Gabelli Equity  vs.  Americafirst Defensive Growth

Gabelli Equity

Risk-Adjusted Performance

Very Weak

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

Americafirst Defensive

Risk-Adjusted Performance

Very Weak

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

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

The idea behind The Gabelli Equity and Americafirst Defensive 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.