Correlation Between Gamco Natural and World Energy

Can any of the company-specific risk be diversified away by investing in both Gamco Natural and World Energy 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 World Energy 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 World Energy Fund, you can compare the effects of market volatilities on Gamco Natural and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamco Natural and World Energy.

Diversification Opportunities for Gamco Natural and World Energy

0.56

Correlation Coefficient

Gamco Natural  World Energy

Very weak diversification

The 3 months correlation between Gamco and WORLD is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Gamco Natural i.e., Gamco Natural and World Energy go up and down completely randomly.

Pair Corralation between Gamco Natural and World Energy

Assuming the 90 days horizon Gamco Natural Resources is expected to generate 0.52 times more return on investment than World Energy. However, Gamco Natural Resources is 1.92 times less risky than World Energy. It trades about 0.0 of its potential returns per unit of risk. World Energy Fund is currently generating about -0.08 per unit of risk. If you would invest  646.00  in Gamco Natural Resources on November 29, 2024 and sell it today you would earn a total of  0.00  from holding Gamco Natural Resources or generate 0.0% return on investment over 90 days.

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

Gamco Natural Resources  vs.  World Energy Fund

Gamco Natural Resources

Risk-Adjusted Performance

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 fairly strong basic indicators, Gamco Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

World Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days World Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental 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 World Energy

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

The idea behind Gamco Natural Resources and World Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.