Correlation Between Gabelli Global and Palmer Square

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

By analyzing existing cross correlation between Gabelli Global Financial and Palmer Square Ultra Short, you can compare the effects of market volatilities on Gabelli Global and Palmer Square 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 Gabelli Global with a short position of Palmer Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Global and Palmer Square.

Diversification Opportunities for Gabelli Global and Palmer Square

0.55

Correlation Coefficient

Gabelli Global  Palmer Square

Very weak diversification

The 3 months correlation between Gabelli and Palmer is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gabelli Global Financial and Palmer Square Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palmer Square Ultra and Gabelli 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 Gabelli Global Financial are associated (or correlated) with Palmer Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palmer Square Ultra has no effect on the direction of Gabelli Global i.e., Gabelli Global and Palmer Square go up and down completely randomly.

Pair Corralation between Gabelli Global and Palmer Square

Assuming the 90 days horizon Gabelli Global Financial is expected to generate 14.46 times more return on investment than Palmer Square. However, Gabelli Global is 14.46 times more volatile than Palmer Square Ultra Short. It trades about 0.08 of its potential returns per unit of risk. Palmer Square Ultra Short is currently generating about 0.29 per unit of risk. If you would invest  1,106  in Gabelli Global Financial on October 11, 2024 and sell it today you would earn a total of  461.00  from holding Gabelli Global Financial or generate 41.68% return on investment over 90 days.

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

Gabelli Global Financial  vs.  Palmer Square Ultra Short

Gabelli Global Financial

Risk-Adjusted Performance

0 of 100

Insignificant

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

Palmer Square Ultra

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gabelli Global and Palmer Square

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

The idea behind Gabelli Global Financial and Palmer Square Ultra Short 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.