Correlation Between SPDR SP and Gabelli Financial

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

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

Diversification Opportunities for SPDR SP and Gabelli Financial

0.82

Correlation Coefficient

SPDR SP  Gabelli Financial

Very poor diversification

The 3 months correlation between SPDR and Gabelli is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Regional and Gabelli Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Financial and SPDR SP 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 SPDR SP Regional are associated (or correlated) with Gabelli Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Financial has no effect on the direction of SPDR SP i.e., SPDR SP and Gabelli Financial go up and down completely randomly.

Pair Corralation between SPDR SP and Gabelli Financial

Considering the 90-day investment horizon SPDR SP Regional is expected to under-perform the Gabelli Financial. In addition to that, SPDR SP is 1.49 times more volatile than Gabelli Financial Services. It trades about -0.11 of its total potential returns per unit of risk. Gabelli Financial Services is currently generating about -0.09 per unit of volatility. If you would invest  4,834  in Gabelli Financial Services on November 28, 2024 and sell it today you would lose (260.00) from holding Gabelli Financial Services or give up 5.38% of portfolio value over 90 days.

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

SPDR SP Regional  vs.  Gabelli Financial Services

SPDR SP Regional

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Regional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Gabelli Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR SP and Gabelli Financial

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

The idea behind SPDR SP Regional and Gabelli Financial Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.