Correlation Between Investor and Gabelli Multimedia

Can any of the company-specific risk be diversified away by investing in both Investor and Gabelli Multimedia 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 Multimedia 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 Multimedia, you can compare the effects of market volatilities on Investor and Gabelli Multimedia 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 Multimedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Gabelli Multimedia.

Diversification Opportunities for Investor and Gabelli Multimedia

0.62

Correlation Coefficient

Investor  Gabelli Multimedia

Poor diversification

The 3 months correlation between Investor and Gabelli is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and The Gabelli Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Multimedia 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 Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Multimedia has no effect on the direction of Investor i.e., Investor and Gabelli Multimedia go up and down completely randomly.

Pair Corralation between Investor and Gabelli Multimedia

Assuming the 90 days horizon Investor AB ser is expected to under-perform the Gabelli Multimedia. In addition to that, Investor is 1.1 times more volatile than The Gabelli Multimedia. It trades about -0.15 of its total potential returns per unit of risk. The Gabelli Multimedia is currently generating about -0.02 per unit of volatility. If you would invest  2,304  in The Gabelli Multimedia on October 6, 2024 and sell it today you would lose (16.00) from holding The Gabelli Multimedia or give up 0.69% of portfolio value over 90 days.

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

Investor AB ser  vs.  The Gabelli Multimedia

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 nearly stable fundamental drivers, Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

The Gabelli Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Investor and Gabelli Multimedia

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

The idea behind Investor AB ser and The Gabelli Multimedia 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.