Correlation Between Small Cap and Gabelli Val

Can any of the company-specific risk be diversified away by investing in both Small Cap and Gabelli Val 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 Small Cap and Gabelli Val into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Equity and The Gabelli Val, you can compare the effects of market volatilities on Small Cap and Gabelli Val 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 Small Cap with a short position of Gabelli Val. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Gabelli Val.

Diversification Opportunities for Small Cap and Gabelli Val

0.24

Correlation Coefficient

Small Cap  Gabelli Val

Modest diversification

The 3 months correlation between Small and Gabelli is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and The Gabelli Val in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Val and Small Cap 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 Small Cap Equity are associated (or correlated) with Gabelli Val. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Val has no effect on the direction of Small Cap i.e., Small Cap and Gabelli Val go up and down completely randomly.

Pair Corralation between Small Cap and Gabelli Val

Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Gabelli Val. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Equity is 1.09 times less risky than Gabelli Val. The mutual fund trades about -0.1 of its potential returns per unit of risk. The The Gabelli Val is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,061  in The Gabelli Val on December 26, 2024 and sell it today you would lose (21.00) from holding The Gabelli Val or give up 1.98% of portfolio value over 90 days.

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

Small Cap Equity  vs.  The Gabelli Val

Small Cap Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Gabelli Val

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gabelli Val has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Gabelli Val is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Gabelli Val

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

The idea behind Small Cap Equity and The Gabelli Val 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.