Correlation Between Value Line and The Gabelli

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

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

Diversification Opportunities for Value Line and The Gabelli

0.8

Correlation Coefficient

Value Line  The Gabelli

Very poor diversification

The 3 months correlation between Value and The is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Value Line Premier and The Gabelli Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Growth and Value Line 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 Value Line Premier 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 Growth has no effect on the direction of Value Line i.e., Value Line and The Gabelli go up and down completely randomly.

Pair Corralation between Value Line and The Gabelli

Assuming the 90 days horizon Value Line is expected to generate 1.86 times less return on investment than The Gabelli. But when comparing it to its historical volatility, Value Line Premier is 1.28 times less risky than The Gabelli. It trades about 0.08 of its potential returns per unit of risk. The Gabelli Growth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,299  in The Gabelli Growth on September 5, 2024 and sell it today you would earn a total of  5,676  from holding The Gabelli Growth or generate 90.11% return on investment over 90 days.

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

Value Line Premier  vs.  The Gabelli Growth

Value Line Premier

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line Premier are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Value Line is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gabelli Growth

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, The Gabelli showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Value Line and The Gabelli

The main advantage of trading using opposite Value Line and The Gabelli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Line 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 Value Line Premier and The Gabelli Growth 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.