Correlation Between GAMCO Natural and China Health

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

Diversification Opportunities for GAMCO Natural and China Health

0.59

Correlation Coefficient

GAMCO Natural  China Health

Very weak diversification

The 3 months correlation between GAMCO and China is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management 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 China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and China Health go up and down completely randomly.

Pair Corralation between GAMCO Natural and China Health

Considering the 90-day investment horizon GAMCO Natural is expected to generate 4.7 times less return on investment than China Health. But when comparing it to its historical volatility, GAMCO Natural Resources is 15.77 times less risky than China Health. It trades about 0.32 of its potential returns per unit of risk. China Health Management is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.35  in China Health Management on December 27, 2024 and sell it today you would earn a total of  0.14  from holding China Health Management or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

GAMCO Natural Resources  vs.  China Health Management

GAMCO Natural Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 25 (%) 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.

China Health Management

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAMCO Natural and China Health

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

The idea behind GAMCO Natural Resources and China Health Management 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.