Correlation Between GAMCO Natural and High-yield Municipal

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

By analyzing existing cross correlation between GAMCO Natural Resources and High Yield Municipal Fund, you can compare the effects of market volatilities on GAMCO Natural and High-yield Municipal 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 Natural with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMCO Natural and High-yield Municipal.

Diversification Opportunities for GAMCO Natural and High-yield Municipal

0.34

Correlation Coefficient

GAMCO Natural  High-yield Municipal

Weak diversification

The 3 months correlation between GAMCO and High-yield is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal and GAMCO Natural 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 Natural Resources are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and High-yield Municipal go up and down completely randomly.

Pair Corralation between GAMCO Natural and High-yield Municipal

Assuming the 90 days trading horizon GAMCO Natural Resources is expected to under-perform the High-yield Municipal. In addition to that, GAMCO Natural is 1.78 times more volatile than High Yield Municipal Fund. It trades about -0.2 of its total potential returns per unit of risk. High Yield Municipal Fund is currently generating about -0.07 per unit of volatility. If you would invest  900.00  in High Yield Municipal Fund on October 6, 2024 and sell it today you would lose (13.00) from holding High Yield Municipal Fund or give up 1.44% of portfolio value over 90 days.

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

GAMCO Natural Resources  vs.  High Yield Municipal Fund

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GAMCO Natural and High-yield Municipal

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

The idea behind GAMCO Natural Resources and High Yield Municipal Fund 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.