Correlation Between Swan Defined and Gabelli Healthcare

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

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

Diversification Opportunities for Swan Defined and Gabelli Healthcare

-0.09

Correlation Coefficient

Swan Defined  Gabelli Healthcare

Good diversification

The 3 months correlation between Swan and Gabelli is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and The Gabelli Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Healthcare and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Gabelli Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Healthcare has no effect on the direction of Swan Defined i.e., Swan Defined and Gabelli Healthcare go up and down completely randomly.

Pair Corralation between Swan Defined and Gabelli Healthcare

Assuming the 90 days horizon Swan Defined Risk is expected to under-perform the Gabelli Healthcare. In addition to that, Swan Defined is 1.51 times more volatile than The Gabelli Healthcare. It trades about -0.07 of its total potential returns per unit of risk. The Gabelli Healthcare is currently generating about 0.06 per unit of volatility. If you would invest  1,103  in The Gabelli Healthcare on December 20, 2024 and sell it today you would earn a total of  34.00  from holding The Gabelli Healthcare or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.44%
Values	Daily Returns

Swan Defined Risk  vs.  The Gabelli Healthcare

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

The Gabelli Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Healthcare are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gabelli Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swan Defined and Gabelli Healthcare

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

The idea behind Swan Defined Risk and The Gabelli Healthcare 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.