Correlation Between GAMCO Natural and Central Europe

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

Diversification Opportunities for GAMCO Natural and Central Europe

0.88

Correlation Coefficient

GAMCO Natural  Central Europe

Very poor diversification

The 3 months correlation between GAMCO and Central is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and Central Europe Russia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Europe Russia 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 Central Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Europe Russia has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and Central Europe go up and down completely randomly.

Pair Corralation between GAMCO Natural and Central Europe

Considering the 90-day investment horizon GAMCO Natural is expected to generate 1.99 times less return on investment than Central Europe. But when comparing it to its historical volatility, GAMCO Natural Resources is 3.89 times less risky than Central Europe. It trades about 0.34 of its potential returns per unit of risk. Central Europe Russia is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Central Europe Russia on December 28, 2024 and sell it today you would earn a total of  377.00  from holding Central Europe Russia or generate 33.45% return on investment over 90 days.

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

GAMCO Natural Resources  vs.  Central Europe Russia

GAMCO Natural Resources

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, GAMCO Natural unveiled solid returns over the last few months and may actually be approaching a breakup point.

Central Europe Russia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Europe Russia are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather fragile technical and fundamental indicators, Central Europe exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAMCO Natural and Central Europe

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

The idea behind GAMCO Natural Resources and Central Europe Russia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.