Correlation Between Gabelli Multimedia and Invesco Trust

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

By analyzing existing cross correlation between The Gabelli Multimedia and Invesco Trust For, you can compare the effects of market volatilities on Gabelli Multimedia and Invesco Trust 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 Multimedia with a short position of Invesco Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Multimedia and Invesco Trust.

Diversification Opportunities for Gabelli Multimedia and Invesco Trust

0.05

Correlation Coefficient

Gabelli Multimedia  Invesco Trust

Significant diversification

The 3 months correlation between Gabelli and Invesco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Multimedia and Invesco Trust For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Trust For and Gabelli Multimedia 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 Multimedia are associated (or correlated) with Invesco Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Trust For has no effect on the direction of Gabelli Multimedia i.e., Gabelli Multimedia and Invesco Trust go up and down completely randomly.

Pair Corralation between Gabelli Multimedia and Invesco Trust

Assuming the 90 days trading horizon The Gabelli Multimedia is expected to under-perform the Invesco Trust. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Gabelli Multimedia is 1.44 times less risky than Invesco Trust. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Invesco Trust For is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,033  in Invesco Trust For on December 30, 2024 and sell it today you would earn a total of  10.00  from holding Invesco Trust For or generate 0.97% return on investment over 90 days.

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

The Gabelli Multimedia  vs.  Invesco Trust For

The Gabelli Multimedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gabelli Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gabelli Multimedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Trust For

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Trust For are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Invesco Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gabelli Multimedia and Invesco Trust

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

The idea behind The Gabelli Multimedia and Invesco Trust For 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.