Correlation Between State Street and GAMCO Global

Can any of the company-specific risk be diversified away by investing in both State Street and GAMCO Global 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 State Street and GAMCO Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Street and GAMCO Global Gold, you can compare the effects of market volatilities on State Street and GAMCO Global 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 State Street with a short position of GAMCO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and GAMCO Global.

Diversification Opportunities for State Street and GAMCO Global

0.17

Correlation Coefficient

State Street  GAMCO Global

Average diversification

The 3 months correlation between State and GAMCO is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding State Street and GAMCO Global Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Global Gold and State Street 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 State Street are associated (or correlated) with GAMCO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Global Gold has no effect on the direction of State Street i.e., State Street and GAMCO Global go up and down completely randomly.

Pair Corralation between State Street and GAMCO Global

Assuming the 90 days trading horizon State Street is expected to under-perform the GAMCO Global. But the preferred stock apears to be less risky and, when comparing its historical volatility, State Street is 1.28 times less risky than GAMCO Global. The preferred stock trades about -0.01 of its potential returns per unit of risk. The GAMCO Global Gold is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,021  in GAMCO Global Gold on December 29, 2024 and sell it today you would earn a total of  61.00  from holding GAMCO Global Gold or generate 3.02% return on investment over 90 days.

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

State Street  vs.  GAMCO Global Gold

State Street

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GAMCO Global Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Global Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GAMCO Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Street and GAMCO Global

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

The idea behind State Street and GAMCO Global Gold 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.