Correlation Between Technology Ultrasector and Gamco Natural

Can any of the company-specific risk be diversified away by investing in both Technology Ultrasector and Gamco Natural 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 Technology Ultrasector and Gamco Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Technology Ultrasector Profund and Gamco Natural Resources, you can compare the effects of market volatilities on Technology Ultrasector and Gamco Natural 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 Technology Ultrasector with a short position of Gamco Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Ultrasector and Gamco Natural.

Diversification Opportunities for Technology Ultrasector and Gamco Natural

-0.04

Correlation Coefficient

Technology Ultrasector  Gamco Natural

Good diversification

The 3 months correlation between Technology and Gamco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Gamco Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Natural Resources and Technology Ultrasector 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 Technology Ultrasector Profund are associated (or correlated) with Gamco Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Natural Resources has no effect on the direction of Technology Ultrasector i.e., Technology Ultrasector and Gamco Natural go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Gamco Natural

Assuming the 90 days horizon Technology Ultrasector Profund is expected to generate 2.49 times more return on investment than Gamco Natural. However, Technology Ultrasector is 2.49 times more volatile than Gamco Natural Resources. It trades about 0.06 of its potential returns per unit of risk. Gamco Natural Resources is currently generating about 0.02 per unit of risk. If you would invest  2,711  in Technology Ultrasector Profund on October 5, 2024 and sell it today you would earn a total of  1,020  from holding Technology Ultrasector Profund or generate 37.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Technology Ultrasector Profund  vs.  Gamco Natural Resources

Technology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gamco Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Technology Ultrasector and Gamco Natural

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

The idea behind Technology Ultrasector Profund and Gamco Natural Resources 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.