Correlation Between GAMCO Natural and Invesco California

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

Diversification Opportunities for GAMCO Natural and Invesco California

0.39

Correlation Coefficient

GAMCO Natural  Invesco California

Weak diversification

The 3 months correlation between GAMCO and Invesco is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value 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 Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and Invesco California go up and down completely randomly.

Pair Corralation between GAMCO Natural and Invesco California

Considering the 90-day investment horizon GAMCO Natural Resources is expected to generate 1.01 times more return on investment than Invesco California. However, GAMCO Natural is 1.01 times more volatile than Invesco California Value. It trades about 0.34 of its potential returns per unit of risk. Invesco California Value is currently generating about 0.03 per unit of risk. If you would invest  515.00  in GAMCO Natural Resources on December 28, 2024 and sell it today you would earn a total of  87.00  from holding GAMCO Natural Resources or generate 16.89% 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.  Invesco California Value

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.

Invesco California Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco California Value are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GAMCO Natural and Invesco California

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

The idea behind GAMCO Natural Resources and Invesco California Value 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.