Correlation Between Pax Balanced and Gabelli Equity

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

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

Diversification Opportunities for Pax Balanced and Gabelli Equity

0.7

Correlation Coefficient

Pax Balanced  Gabelli Equity

Poor diversification

The 3 months correlation between Pax and Gabelli is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pax Balanced Fund and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and Pax Balanced 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 Pax Balanced Fund 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 Pax Balanced i.e., Pax Balanced and Gabelli Equity go up and down completely randomly.

Pair Corralation between Pax Balanced and Gabelli Equity

Assuming the 90 days horizon Pax Balanced Fund is expected to generate 0.68 times more return on investment than Gabelli Equity. However, Pax Balanced Fund is 1.46 times less risky than Gabelli Equity. It trades about 0.05 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.03 per unit of risk. If you would invest  2,301  in Pax Balanced Fund on October 7, 2024 and sell it today you would earn a total of  293.00  from holding Pax Balanced Fund or generate 12.73% return on investment over 90 days.

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

Pax Balanced Fund  vs.  The Gabelli Equity

Pax Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Gabelli Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pax Balanced and Gabelli Equity

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.