Correlation Between Invesco California and Gabelli Utility

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

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

Diversification Opportunities for Invesco California and Gabelli Utility

0.51

Correlation Coefficient

Invesco California  Gabelli Utility

Very weak diversification

The 3 months correlation between Invesco and Gabelli is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Invesco California Value and The Gabelli Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Utility and Invesco California 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 Invesco California Value are associated (or correlated) with Gabelli Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Utility has no effect on the direction of Invesco California i.e., Invesco California and Gabelli Utility go up and down completely randomly.

Pair Corralation between Invesco California and Gabelli Utility

Considering the 90-day investment horizon Invesco California Value is expected to generate 1.55 times more return on investment than Gabelli Utility. However, Invesco California is 1.55 times more volatile than The Gabelli Utility. It trades about 0.18 of its potential returns per unit of risk. The Gabelli Utility is currently generating about 0.16 per unit of risk. If you would invest  1,018  in Invesco California Value on September 21, 2024 and sell it today you would earn a total of  32.00  from holding Invesco California Value or generate 3.14% return on investment over 90 days.

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

Invesco California Value  vs.  The Gabelli Utility

Invesco California Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gabelli Utility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Utility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gabelli Utility is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco California and Gabelli Utility

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

The idea behind Invesco California Value and The Gabelli Utility 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.