Correlation Between Gabelli Gold and M Large

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

By analyzing existing cross correlation between Gabelli Gold Fund and M Large Cap, you can compare the effects of market volatilities on Gabelli Gold and M Large 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 Gold with a short position of M Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Gold and M Large.

Diversification Opportunities for Gabelli Gold and M Large

0.14

Correlation Coefficient

Gabelli Gold  M Large

Average diversification

The 3 months correlation between Gabelli and MTCGX is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gabelli Gold Fund and M Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M Large Cap and Gabelli Gold 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 Gold Fund are associated (or correlated) with M Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M Large Cap has no effect on the direction of Gabelli Gold i.e., Gabelli Gold and M Large go up and down completely randomly.

Pair Corralation between Gabelli Gold and M Large

Assuming the 90 days horizon Gabelli Gold is expected to generate 2.04 times less return on investment than M Large. In addition to that, Gabelli Gold is 1.29 times more volatile than M Large Cap. It trades about 0.02 of its total potential returns per unit of risk. M Large Cap is currently generating about 0.06 per unit of volatility. If you would invest  2,362  in M Large Cap on October 10, 2024 and sell it today you would earn a total of  1,009  from holding M Large Cap or generate 42.72% return on investment over 90 days.

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

Gabelli Gold Fund  vs.  M Large Cap

Gabelli Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gabelli Gold Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

M Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days M Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, M Large 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 Gold and M Large

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

The idea behind Gabelli Gold Fund and M Large Cap 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 Transaction History module to view history of all your transactions and understand their impact on performance.