Correlation Between Smallcap World and The Gabelli

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

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

Diversification Opportunities for Smallcap World and The Gabelli

0.97

Correlation Coefficient

Smallcap World  The Gabelli

Almost no diversification

The 3 months correlation between Smallcap and The is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and The Gabelli Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Small and Smallcap World 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 Smallcap World Fund 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 Smallcap World i.e., Smallcap World and The Gabelli go up and down completely randomly.

Pair Corralation between Smallcap World and The Gabelli

Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.01 times more return on investment than The Gabelli. However, Smallcap World is 1.01 times more volatile than The Gabelli Small. It trades about -0.07 of its potential returns per unit of risk. The Gabelli Small is currently generating about -0.08 per unit of risk. If you would invest  6,980  in Smallcap World Fund on December 22, 2024 and sell it today you would lose (318.00) from holding Smallcap World Fund or give up 4.56% of portfolio value over 90 days.

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

Smallcap World Fund  vs.  The Gabelli Small

Smallcap World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap World Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Smallcap World 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 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 Smallcap World and The Gabelli

The main advantage of trading using opposite Smallcap World and The Gabelli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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 Smallcap World Fund 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.