Correlation Between Wilmington Municipal and Gamco Natural

Can any of the company-specific risk be diversified away by investing in both Wilmington Municipal and Gamco Natural 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 Wilmington Municipal and Gamco Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wilmington Municipal Bond and Gamco Natural Resources, you can compare the effects of market volatilities on Wilmington Municipal and Gamco Natural 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 Wilmington Municipal with a short position of Gamco Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilmington Municipal and Gamco Natural.

Diversification Opportunities for Wilmington Municipal and Gamco Natural

0.34

Correlation Coefficient

Wilmington Municipal  Gamco Natural

Weak diversification

The 3 months correlation between Wilmington and Gamco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Wilmington Municipal Bond and Gamco Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Natural Resources and Wilmington Municipal 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 Wilmington Municipal Bond are associated (or correlated) with Gamco Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Natural Resources has no effect on the direction of Wilmington Municipal i.e., Wilmington Municipal and Gamco Natural go up and down completely randomly.

Pair Corralation between Wilmington Municipal and Gamco Natural

Assuming the 90 days horizon Wilmington Municipal Bond is expected to under-perform the Gamco Natural. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wilmington Municipal Bond is 3.33 times less risky than Gamco Natural. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Gamco Natural Resources is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  597.00  in Gamco Natural Resources on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Gamco Natural Resources or generate 12.23% return on investment over 90 days.

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

Wilmington Municipal Bond  vs.  Gamco Natural Resources

Wilmington Municipal Bond

Risk-Adjusted Performance

Very Weak

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

Gamco Natural Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Natural Resources are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gamco Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wilmington Municipal and Gamco Natural

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

The idea behind Wilmington Municipal Bond and Gamco Natural Resources 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.