Correlation Between GAMCO Global and Highland Funds

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

By analyzing existing cross correlation between GAMCO Global Gold and Highland Funds I, you can compare the effects of market volatilities on GAMCO Global and Highland Funds 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 GAMCO Global with a short position of Highland Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMCO Global and Highland Funds.

Diversification Opportunities for GAMCO Global and Highland Funds

0.85

Correlation Coefficient

GAMCO Global  Highland Funds

Very poor diversification

The 3 months correlation between GAMCO and Highland is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Global Gold and Highland Funds I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Funds I and GAMCO 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 GAMCO Global Gold are associated (or correlated) with Highland Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Funds I has no effect on the direction of GAMCO Global i.e., GAMCO Global and Highland Funds go up and down completely randomly.

Pair Corralation between GAMCO Global and Highland Funds

Assuming the 90 days trading horizon GAMCO Global Gold is expected to generate 1.26 times more return on investment than Highland Funds. However, GAMCO Global is 1.26 times more volatile than Highland Funds I. It trades about 0.01 of its potential returns per unit of risk. Highland Funds I is currently generating about -0.09 per unit of risk. If you would invest  2,029  in GAMCO Global Gold on September 25, 2024 and sell it today you would earn a total of  7.00  from holding GAMCO Global Gold or generate 0.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

GAMCO Global Gold  vs.  Highland Funds I

GAMCO Global Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Global Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Highland Funds I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Funds I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GAMCO Global and Highland Funds

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

The idea behind GAMCO Global Gold and Highland Funds I 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.