Correlation Between Gabelli Global and Western Asset

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

By analyzing existing cross correlation between Gabelli Global Small and Western Asset Global, you can compare the effects of market volatilities on Gabelli Global and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Global and Western Asset.

Diversification Opportunities for Gabelli Global and Western Asset

0.8

Correlation Coefficient

Gabelli Global  Western Asset

Very poor diversification

The 3 months correlation between Gabelli and Western is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gabelli Global Small and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global 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 Small are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of Gabelli Global i.e., Gabelli Global and Western Asset go up and down completely randomly.

Pair Corralation between Gabelli Global and Western Asset

Considering the 90-day investment horizon Gabelli Global Small is expected to generate 1.47 times more return on investment than Western Asset. However, Gabelli Global is 1.47 times more volatile than Western Asset Global. It trades about 0.1 of its potential returns per unit of risk. Western Asset Global is currently generating about 0.12 per unit of risk. If you would invest  1,149  in Gabelli Global Small on December 28, 2024 and sell it today you would earn a total of  57.00  from holding Gabelli Global Small or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Gabelli Global Small  vs.  Western Asset Global

Gabelli Global Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Global Small are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Gabelli Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Global

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Global are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong technical indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gabelli Global and Western Asset

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

The idea behind Gabelli Global Small and Western Asset Global 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.