Correlation Between Investor and Gabelli Equity

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

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

Diversification Opportunities for Investor and Gabelli Equity

0.83

Correlation Coefficient

Investor  Gabelli Equity

Very poor diversification

The 3 months correlation between Investor and Gabelli is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and Investor 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 Investor AB ser 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 Investor i.e., Investor and Gabelli Equity go up and down completely randomly.

Pair Corralation between Investor and Gabelli Equity

Assuming the 90 days horizon Investor AB ser is expected to under-perform the Gabelli Equity. In addition to that, Investor is 1.34 times more volatile than The Gabelli Equity. It trades about -0.24 of its total potential returns per unit of risk. The Gabelli Equity is currently generating about -0.14 per unit of volatility. If you would invest  2,260  in The Gabelli Equity on October 5, 2024 and sell it today you would lose (74.00) from holding The Gabelli Equity or give up 3.27% of portfolio value over 90 days.

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

Investor AB ser  vs.  The Gabelli Equity

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

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 quite persistent fundamental drivers, Gabelli Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Investor and Gabelli Equity

The main advantage of trading using opposite Investor and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investor 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 Investor AB ser 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.