Correlation Between Westwood Largecap and Gabelli Dividend

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

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

Diversification Opportunities for Westwood Largecap and Gabelli Dividend

0.66

Correlation Coefficient

Westwood Largecap  Gabelli Dividend

Poor diversification

The 3 months correlation between Westwood and Gabelli is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Gabelli Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Dividend Income and Westwood Largecap 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 Westwood Largecap Value are associated (or correlated) with Gabelli Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Dividend Income has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Gabelli Dividend go up and down completely randomly.

Pair Corralation between Westwood Largecap and Gabelli Dividend

Assuming the 90 days horizon Westwood Largecap Value is expected to under-perform the Gabelli Dividend. In addition to that, Westwood Largecap is 1.33 times more volatile than Gabelli Dividend Income. It trades about -0.14 of its total potential returns per unit of risk. Gabelli Dividend Income is currently generating about -0.05 per unit of volatility. If you would invest  2,519  in Gabelli Dividend Income on November 29, 2024 and sell it today you would lose (57.00) from holding Gabelli Dividend Income or give up 2.26% of portfolio value over 90 days.

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

Westwood Largecap Value  vs.  Gabelli Dividend Income

Westwood Largecap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westwood Largecap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Gabelli Dividend Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gabelli Dividend Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable fundamental indicators, Gabelli Dividend is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Westwood Largecap and Gabelli Dividend

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

The idea behind Westwood Largecap Value and Gabelli Dividend Income 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.