Correlation Between Gabelli Utility and Gabelli Equity

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

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

Diversification Opportunities for Gabelli Utility and Gabelli Equity

-0.3

Correlation Coefficient

Gabelli Utility  Gabelli Equity

Very good diversification

The 3 months correlation between Gabelli and Gabelli is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Utility and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and Gabelli Utility 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 The Gabelli Utility are associated (or correlated) with Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of Gabelli Utility i.e., Gabelli Utility and Gabelli Equity go up and down completely randomly.

Pair Corralation between Gabelli Utility and Gabelli Equity

Assuming the 90 days trading horizon The Gabelli Utility is expected to under-perform the Gabelli Equity. In addition to that, Gabelli Utility is 1.8 times more volatile than The Gabelli Equity. It trades about -0.03 of its total potential returns per unit of risk. The Gabelli Equity is currently generating about 0.06 per unit of volatility. If you would invest  2,140  in The Gabelli Equity on November 19, 2024 and sell it today you would earn a total of  10.00  from holding The Gabelli Equity or generate 0.47% return on investment over 90 days.

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

The Gabelli Utility  vs.  The Gabelli Equity

Gabelli Utility

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Utility are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gabelli Utility is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Gabelli Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Gabelli Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gabelli Utility and Gabelli Equity

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

The idea behind The Gabelli Utility and The Gabelli Equity 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..