Correlation Between Payden Emerging and The Gabelli

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

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

Diversification Opportunities for Payden Emerging and The Gabelli

-0.43

Correlation Coefficient

Payden Emerging  The Gabelli

Very good diversification

The 3 months correlation between Payden and The is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Payden Emerging Markets and The Gabelli Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Small and Payden Emerging 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 Payden Emerging Markets 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 Small has no effect on the direction of Payden Emerging i.e., Payden Emerging and The Gabelli go up and down completely randomly.

Pair Corralation between Payden Emerging and The Gabelli

Assuming the 90 days horizon Payden Emerging Markets is expected to generate 0.11 times more return on investment than The Gabelli. However, Payden Emerging Markets is 8.9 times less risky than The Gabelli. It trades about 0.3 of its potential returns per unit of risk. The Gabelli Small is currently generating about -0.05 per unit of risk. If you would invest  864.00  in Payden Emerging Markets on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Payden Emerging Markets or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Payden Emerging Markets  vs.  The Gabelli Small

Payden Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Emerging Markets are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Payden Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gabelli Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gabelli Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Payden Emerging and The Gabelli

The main advantage of trading using opposite Payden Emerging and The Gabelli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Payden Emerging 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 Payden Emerging Markets and The Gabelli Small 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.