Correlation Between Gabelli Value and Gabelli Small

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

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

Diversification Opportunities for Gabelli Value and Gabelli Small

0.77

Correlation Coefficient

Gabelli Value  Gabelli Small

Poor diversification

The 3 months correlation between Gabelli and Gabelli is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Value and The Gabelli Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Small and Gabelli Value 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 Value are associated (or correlated) with Gabelli Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Small has no effect on the direction of Gabelli Value i.e., Gabelli Value and Gabelli Small go up and down completely randomly.

Pair Corralation between Gabelli Value and Gabelli Small

Assuming the 90 days horizon The Gabelli Value is expected to under-perform the Gabelli Small. In addition to that, Gabelli Value is 1.83 times more volatile than The Gabelli Small. It trades about -0.32 of its total potential returns per unit of risk. The Gabelli Small is currently generating about -0.34 per unit of volatility. If you would invest  4,868  in The Gabelli Small on October 7, 2024 and sell it today you would lose (322.00) from holding The Gabelli Small or give up 6.61% of portfolio value over 90 days.

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

The Gabelli Value  vs.  The Gabelli Small

Gabelli Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Value 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 Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gabelli Value and Gabelli Small

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

The idea behind The Gabelli Value and The Gabelli Small 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.