Correlation Between M Large and The Gabelli

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

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

Diversification Opportunities for M Large and The Gabelli

-0.22

Correlation Coefficient

M Large  The Gabelli

Very good diversification

The 3 months correlation between MTCGX and THE is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and The Gabelli Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Focus and M Large 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 M Large Cap are associated (or correlated) with The Gabelli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Focus has no effect on the direction of M Large i.e., M Large and The Gabelli go up and down completely randomly.

Pair Corralation between M Large and The Gabelli

Assuming the 90 days horizon M Large Cap is expected to under-perform the The Gabelli. In addition to that, M Large is 2.45 times more volatile than The Gabelli Focus. It trades about -0.13 of its total potential returns per unit of risk. The Gabelli Focus is currently generating about 0.11 per unit of volatility. If you would invest  1,833  in The Gabelli Focus on December 27, 2024 and sell it today you would earn a total of  99.00  from holding The Gabelli Focus or generate 5.4% return on investment over 90 days.

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

M Large Cap  vs.  The Gabelli Focus

M Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days M Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Gabelli Focus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Focus are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, The Gabelli is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and The Gabelli

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

The idea behind M Large Cap and The Gabelli Focus 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.