Correlation Between Small-cap Value and Gabelli Convertible

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

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

Diversification Opportunities for Small-cap Value and Gabelli Convertible

0.48

Correlation Coefficient

Small-cap Value  Gabelli Convertible

Very weak diversification

The 3 months correlation between Small-cap and Gabelli is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Gabelli Convertible And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Convertible And and Small-cap 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 Small Cap Value Series are associated (or correlated) with Gabelli Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Convertible And has no effect on the direction of Small-cap Value i.e., Small-cap Value and Gabelli Convertible go up and down completely randomly.

Pair Corralation between Small-cap Value and Gabelli Convertible

Assuming the 90 days horizon Small Cap Value Series is expected to under-perform the Gabelli Convertible. In addition to that, Small-cap Value is 1.4 times more volatile than Gabelli Convertible And. It trades about -0.33 of its total potential returns per unit of risk. Gabelli Convertible And is currently generating about -0.11 per unit of volatility. If you would invest  396.00  in Gabelli Convertible And on October 4, 2024 and sell it today you would lose (15.00) from holding Gabelli Convertible And or give up 3.79% of portfolio value over 90 days.

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

Small Cap Value Series  vs.  Gabelli Convertible And

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gabelli Convertible And

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Convertible And are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly stable fundamental indicators, Gabelli Convertible is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Small-cap Value and Gabelli Convertible

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

The idea behind Small Cap Value Series and Gabelli Convertible And 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.