Correlation Between The Gabelli and Prudential Core

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

Diversification Opportunities for The Gabelli and Prudential Core

0.25

Correlation Coefficient

The Gabelli  Prudential Core

Modest diversification

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

Pair Corralation between The Gabelli and Prudential Core

Assuming the 90 days horizon The Gabelli is expected to generate 1.21 times less return on investment than Prudential Core. In addition to that, The Gabelli is 2.64 times more volatile than Prudential E Bond. It trades about 0.04 of its total potential returns per unit of risk. Prudential E Bond is currently generating about 0.13 per unit of volatility. If you would invest  851.00  in Prudential E Bond on December 30, 2024 and sell it today you would earn a total of  20.00  from holding Prudential E Bond or generate 2.35% return on investment over 90 days.

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

The Gabelli Equity  vs.  Prudential E Bond

Gabelli Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Prudential E Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential E Bond are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Core 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 Prudential Core

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

The idea behind The Gabelli Equity and Prudential E Bond 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.