Correlation Between Gamco Natural and Federated Pennsylvania

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

Diversification Opportunities for Gamco Natural and Federated Pennsylvania

-0.1

Correlation Coefficient

Gamco Natural  Federated Pennsylvania

Good diversification

The 3 months correlation between Gamco and Federated is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Federated Pennsylvania Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Pennsylvania 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 Federated Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Pennsylvania has no effect on the direction of Gamco Natural i.e., Gamco Natural and Federated Pennsylvania go up and down completely randomly.

Pair Corralation between Gamco Natural and Federated Pennsylvania

Assuming the 90 days horizon Gamco Natural Resources is expected to under-perform the Federated Pennsylvania. In addition to that, Gamco Natural is 2.77 times more volatile than Federated Pennsylvania Municipal. It trades about -0.02 of its total potential returns per unit of risk. Federated Pennsylvania Municipal is currently generating about 0.02 per unit of volatility. If you would invest  1,012  in Federated Pennsylvania Municipal on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Federated Pennsylvania Municipal or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Gamco Natural Resources  vs.  Federated Pennsylvania Municip

Gamco Natural Resources

Risk-Adjusted Performance

0 of 100

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.

Federated Pennsylvania

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Pennsylvania Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Federated Pennsylvania is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gamco Natural and Federated Pennsylvania

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

The idea behind Gamco Natural Resources and Federated Pennsylvania Municipal 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.