Correlation Between Gabelli Equity and Gabelli Small

Can any of the company-specific risk be diversified away by investing in both Gabelli Equity and Gabelli Small 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 Equity and Gabelli Small 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 The Gabelli Small, you can compare the effects of market volatilities on Gabelli Equity and Gabelli Small 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 Equity with a short position of Gabelli Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Equity and Gabelli Small.

Diversification Opportunities for Gabelli Equity and Gabelli Small

0.68

Correlation Coefficient

Gabelli Equity  Gabelli Small

Poor diversification

The 3 months correlation between Gabelli and Gabelli is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity and The Gabelli Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Small and Gabelli Equity 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 Gabelli Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Small has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and Gabelli Small go up and down completely randomly.

Pair Corralation between Gabelli Equity and Gabelli Small

Assuming the 90 days horizon The Gabelli Equity is expected to generate 0.51 times more return on investment than Gabelli Small. However, The Gabelli Equity is 1.94 times less risky than Gabelli Small. It trades about 0.13 of its potential returns per unit of risk. The Gabelli Small is currently generating about 0.04 per unit of risk. If you would invest  758.00  in The Gabelli Equity on September 13, 2024 and sell it today you would earn a total of  40.00  from holding The Gabelli Equity or generate 5.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

The Gabelli Equity  vs.  The Gabelli Small

Gabelli Equity

Risk-Adjusted Performance

9 of 100

OK

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

Gabelli Small

Risk-Adjusted Performance

3 of 100

Insignificant

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

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

The idea behind The Gabelli Equity and The Gabelli 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.