Correlation Between Gamco Natural and Deutsche Large

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

Diversification Opportunities for Gamco Natural and Deutsche Large

0.34

Correlation Coefficient

Gamco Natural  Deutsche Large

Weak diversification

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

Pair Corralation between Gamco Natural and Deutsche Large

Assuming the 90 days horizon Gamco Natural Resources is expected to under-perform the Deutsche Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gamco Natural Resources is 1.84 times less risky than Deutsche Large. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Deutsche Large Cap is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9,116  in Deutsche Large Cap on October 22, 2024 and sell it today you would lose (168.00) from holding Deutsche Large Cap or give up 1.84% of portfolio value over 90 days.

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

Gamco Natural Resources  vs.  Deutsche Large Cap

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 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.

Deutsche Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Deutsche Large 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 Deutsche Large

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

The idea behind Gamco Natural Resources and Deutsche Large Cap 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 Transaction History module to view history of all your transactions and understand their impact on performance.