Correlation Between International Equity and Gabelli Healthcare

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

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

Diversification Opportunities for International Equity and Gabelli Healthcare

0.76

Correlation Coefficient

International Equity  Gabelli Healthcare

Poor diversification

The 3 months correlation between International and Gabelli is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Fund 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 International Equity 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 International Equity Fund 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 International Equity i.e., International Equity and Gabelli Healthcare go up and down completely randomly.

Pair Corralation between International Equity and Gabelli Healthcare

Assuming the 90 days horizon International Equity Fund is expected to generate 0.89 times more return on investment than Gabelli Healthcare. However, International Equity Fund is 1.12 times less risky than Gabelli Healthcare. It trades about 0.03 of its potential returns per unit of risk. The Gabelli Healthcare is currently generating about -0.01 per unit of risk. If you would invest  1,199  in International Equity Fund on October 25, 2024 and sell it today you would earn a total of  152.00  from holding International Equity Fund or generate 12.68% return on investment over 90 days.

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

International Equity Fund  vs.  The Gabelli Healthcare

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

The Gabelli Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Healthcare has generated negative risk-adjusted returns adding no value to fund investors. 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 International Equity and Gabelli Healthcare

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