Correlation Between Rational Defensive and Gabelli Gold

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

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

Diversification Opportunities for Rational Defensive and Gabelli Gold

0.56

Correlation Coefficient

Rational Defensive  Gabelli Gold

Very weak diversification

The 3 months correlation between Rational and Gabelli is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Gabelli Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Gold and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Gabelli Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Gold has no effect on the direction of Rational Defensive i.e., Rational Defensive and Gabelli Gold go up and down completely randomly.

Pair Corralation between Rational Defensive and Gabelli Gold

Assuming the 90 days horizon Rational Defensive Growth is expected to under-perform the Gabelli Gold. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rational Defensive Growth is 1.51 times less risky than Gabelli Gold. The mutual fund trades about -0.25 of its potential returns per unit of risk. The Gabelli Gold Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,277  in Gabelli Gold Fund on December 2, 2024 and sell it today you would earn a total of  46.00  from holding Gabelli Gold Fund or generate 2.02% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Gabelli Gold Fund

Rational Defensive Growth

Risk-Adjusted Performance

Very Weak

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

Gabelli Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Gold Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gabelli Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rational Defensive and Gabelli Gold

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

The idea behind Rational Defensive Growth and Gabelli Gold Fund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.