Correlation Between Vanguard Consumer and Gabelli Utilities

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

By analyzing existing cross correlation between Vanguard Sumer Staples and Gabelli Utilities, you can compare the effects of market volatilities on Vanguard Consumer and Gabelli Utilities 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 Vanguard Consumer with a short position of Gabelli Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Consumer and Gabelli Utilities.

Diversification Opportunities for Vanguard Consumer and Gabelli Utilities

0.62

Correlation Coefficient

Vanguard Consumer  Gabelli Utilities

Poor diversification

The 3 months correlation between Vanguard and Gabelli is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Sumer Staples and Gabelli Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Utilities and Vanguard Consumer 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 Vanguard Sumer Staples are associated (or correlated) with Gabelli Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Utilities has no effect on the direction of Vanguard Consumer i.e., Vanguard Consumer and Gabelli Utilities go up and down completely randomly.

Pair Corralation between Vanguard Consumer and Gabelli Utilities

Assuming the 90 days horizon Vanguard Consumer is expected to generate 6.5 times less return on investment than Gabelli Utilities. But when comparing it to its historical volatility, Vanguard Sumer Staples is 1.23 times less risky than Gabelli Utilities. It trades about 0.01 of its potential returns per unit of risk. Gabelli Utilities is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Gabelli Utilities on December 23, 2024 and sell it today you would earn a total of  11.00  from holding Gabelli Utilities or generate 1.96% return on investment over 90 days.

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

Vanguard Sumer Staples  vs.  Gabelli Utilities

Vanguard Sumer Staples

Risk-Adjusted Performance

Very Weak

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

Gabelli Utilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Utilities are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gabelli Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Consumer and Gabelli Utilities

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

The idea behind Vanguard Sumer Staples and Gabelli Utilities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.