Correlation Between Gamco Natural and Ariel International

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

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

Diversification Opportunities for Gamco Natural and Ariel International

0.89

Correlation Coefficient

Gamco Natural  Ariel International

Very poor diversification

The 3 months correlation between Gamco and Ariel is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Ariel International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel International and Gamco Natural 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 Gamco Natural Resources are associated (or correlated) with Ariel International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel International has no effect on the direction of Gamco Natural i.e., Gamco Natural and Ariel International go up and down completely randomly.

Pair Corralation between Gamco Natural and Ariel International

Assuming the 90 days horizon Gamco Natural is expected to generate 1.22 times less return on investment than Ariel International. But when comparing it to its historical volatility, Gamco Natural Resources is 1.02 times less risky than Ariel International. It trades about 0.02 of its potential returns per unit of risk. Ariel International Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,299  in Ariel International Fund on October 5, 2024 and sell it today you would earn a total of  68.00  from holding Ariel International Fund or generate 5.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.68%
Values	Daily Returns

Gamco Natural Resources  vs.  Ariel International Fund

Gamco Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamco Natural Resources 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.

Ariel International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gamco Natural and Ariel International

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

The idea behind Gamco Natural Resources and Ariel International Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.