Correlation Between GAMCO Natural and MFS Investment

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

Diversification Opportunities for GAMCO Natural and MFS Investment

0.27

Correlation Coefficient

GAMCO Natural  MFS Investment

Modest diversification

The 3 months correlation between GAMCO and MFS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade 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 MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and MFS Investment go up and down completely randomly.

Pair Corralation between GAMCO Natural and MFS Investment

Considering the 90-day investment horizon GAMCO Natural Resources is expected to generate 1.67 times more return on investment than MFS Investment. However, GAMCO Natural is 1.67 times more volatile than MFS Investment Grade. It trades about 0.24 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.04 per unit of risk. If you would invest  531.00  in GAMCO Natural Resources on December 26, 2024 and sell it today you would earn a total of  67.00  from holding GAMCO Natural Resources or generate 12.62% return on investment over 90 days.

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

GAMCO Natural Resources  vs.  MFS Investment Grade

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 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, GAMCO Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MFS Investment Grade

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GAMCO Natural and MFS Investment

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

The idea behind GAMCO Natural Resources and MFS Investment Grade 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.