Correlation Between GAMCO Natural and Gabelli Equity

Can any of the company-specific risk be diversified away by investing in both GAMCO Natural and Gabelli Equity 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 Gabelli Equity 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 The Gabelli Equity, you can compare the effects of market volatilities on GAMCO Natural and Gabelli Equity 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 Gabelli Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMCO Natural and Gabelli Equity.

Diversification Opportunities for GAMCO Natural and Gabelli Equity

0.92

Correlation Coefficient

GAMCO Natural  Gabelli Equity

Almost no diversification

The 3 months correlation between GAMCO and Gabelli is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity 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 Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and Gabelli Equity go up and down completely randomly.

Pair Corralation between GAMCO Natural and Gabelli Equity

Assuming the 90 days trading horizon GAMCO Natural Resources is expected to generate 0.98 times more return on investment than Gabelli Equity. However, GAMCO Natural Resources is 1.02 times less risky than Gabelli Equity. It trades about -0.23 of its potential returns per unit of risk. The Gabelli Equity is currently generating about -0.24 per unit of risk. If you would invest  2,337  in GAMCO Natural Resources on September 21, 2024 and sell it today you would lose (198.00) from holding GAMCO Natural Resources or give up 8.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

GAMCO Natural Resources  vs.  The Gabelli Equity

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 inconsistent 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.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Preferred Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with GAMCO Natural and Gabelli Equity

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

The idea behind GAMCO Natural Resources and The Gabelli Equity 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 Anywhere module to track or share privately all of your investments from the convenience of any device.