Correlation Between Strategic Allocation and Gabelli Healthcare

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

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

Diversification Opportunities for Strategic Allocation and Gabelli Healthcare

0.77

Correlation Coefficient

Strategic Allocation  Gabelli Healthcare

Poor diversification

The 3 months correlation between Strategic and Gabelli is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate 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 Strategic Allocation 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 Strategic Allocation Moderate 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 Strategic Allocation i.e., Strategic Allocation and Gabelli Healthcare go up and down completely randomly.

Pair Corralation between Strategic Allocation and Gabelli Healthcare

Assuming the 90 days horizon Strategic Allocation is expected to generate 4.86 times less return on investment than Gabelli Healthcare. But when comparing it to its historical volatility, Strategic Allocation Moderate is 1.92 times less risky than Gabelli Healthcare. It trades about 0.04 of its potential returns per unit of risk. The Gabelli Healthcare is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,104  in The Gabelli Healthcare on December 5, 2024 and sell it today you would earn a total of  43.00  from holding The Gabelli Healthcare or generate 3.89% return on investment over 90 days.

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

Strategic Allocation Moderate  vs.  The Gabelli Healthcare

Strategic Allocation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Allocation Moderate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Strategic Allocation 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

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 Strategic Allocation and Gabelli Healthcare

The main advantage of trading using opposite Strategic Allocation and Gabelli Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation 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 Strategic Allocation Moderate 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.