Correlation Between GAMCO Natural and Embrace Change

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

Diversification Opportunities for GAMCO Natural and Embrace Change

0.8

Correlation Coefficient

GAMCO Natural  Embrace Change

Very poor diversification

The 3 months correlation between GAMCO and Embrace is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and Embrace Change Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embrace Change Acqui 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 Embrace Change. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embrace Change Acqui has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and Embrace Change go up and down completely randomly.

Pair Corralation between GAMCO Natural and Embrace Change

Considering the 90-day investment horizon GAMCO Natural Resources is expected to generate 2.23 times more return on investment than Embrace Change. However, GAMCO Natural is 2.23 times more volatile than Embrace Change Acquisition. It trades about 0.32 of its potential returns per unit of risk. Embrace Change Acquisition is currently generating about 0.1 per unit of risk. If you would invest  518.00  in GAMCO Natural Resources on December 27, 2024 and sell it today you would earn a total of  82.20  from holding GAMCO Natural Resources or generate 15.87% 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.  Embrace Change Acquisition

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.

Embrace Change Acqui

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Embrace Change is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GAMCO Natural and Embrace Change

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

The idea behind GAMCO Natural Resources and Embrace Change Acquisition 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.