Correlation Between OFS Credit and Gabelli Equity

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

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

Diversification Opportunities for OFS Credit and Gabelli Equity

0.28

Correlation Coefficient

OFS Credit  Gabelli Equity

Modest diversification

The 3 months correlation between OFS and Gabelli is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding OFS Credit and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and OFS Credit 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 OFS Credit 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 OFS Credit i.e., OFS Credit and Gabelli Equity go up and down completely randomly.

Pair Corralation between OFS Credit and Gabelli Equity

Assuming the 90 days horizon OFS Credit is expected to generate 1.1 times more return on investment than Gabelli Equity. However, OFS Credit is 1.1 times more volatile than The Gabelli Equity. It trades about 0.06 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.05 per unit of risk. If you would invest  2,049  in OFS Credit on August 31, 2024 and sell it today you would earn a total of  429.00  from holding OFS Credit or generate 20.94% return on investment over 90 days.

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

OFS Credit  vs.  The Gabelli Equity

OFS Credit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Credit are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, OFS Credit is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Gabelli Equity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Equity are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Gabelli Equity is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with OFS Credit and Gabelli Equity

The main advantage of trading using opposite OFS Credit and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFS Credit 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 OFS Credit 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.