Correlation Between GAMCO Natural and Franklin Universal

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

Diversification Opportunities for GAMCO Natural and Franklin Universal

0.18

Correlation Coefficient

GAMCO Natural  Franklin Universal

Average diversification

The 3 months correlation between GAMCO and Franklin is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and Franklin Universal Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Universal Closed 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 Franklin Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Universal Closed has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and Franklin Universal go up and down completely randomly.

Pair Corralation between GAMCO Natural and Franklin Universal

Considering the 90-day investment horizon GAMCO Natural Resources is expected to generate 1.43 times more return on investment than Franklin Universal. However, GAMCO Natural is 1.43 times more volatile than Franklin Universal Closed. It trades about 0.29 of its potential returns per unit of risk. Franklin Universal Closed is currently generating about 0.18 per unit of risk. If you would invest  560.00  in GAMCO Natural Resources on September 13, 2024 and sell it today you would earn a total of  27.00  from holding GAMCO Natural Resources or generate 4.82% return on investment over 90 days.

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

GAMCO Natural Resources  vs.  Franklin Universal Closed

GAMCO Natural Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GAMCO Natural is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Franklin Universal Closed

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Universal Closed are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Franklin Universal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GAMCO Natural and Franklin Universal

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

The idea behind GAMCO Natural Resources and Franklin Universal Closed 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.