Correlation Between Gabelli Healthcare and Pace Mortgage-backed

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

By analyzing existing cross correlation between The Gabelli Healthcare and Pace Mortgage Backed Securities, you can compare the effects of market volatilities on Gabelli Healthcare and Pace Mortgage-backed 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 Gabelli Healthcare with a short position of Pace Mortgage-backed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Healthcare and Pace Mortgage-backed.

Diversification Opportunities for Gabelli Healthcare and Pace Mortgage-backed

0.68

Correlation Coefficient

Gabelli Healthcare  Pace Mortgage-backed

Poor diversification

The 3 months correlation between Gabelli and Pace is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Healthcare and Pace Mortgage Backed Securitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Mortgage Backed and Gabelli Healthcare 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 The Gabelli Healthcare are associated (or correlated) with Pace Mortgage-backed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Mortgage Backed has no effect on the direction of Gabelli Healthcare i.e., Gabelli Healthcare and Pace Mortgage-backed go up and down completely randomly.

Pair Corralation between Gabelli Healthcare and Pace Mortgage-backed

Assuming the 90 days horizon The Gabelli Healthcare is expected to under-perform the Pace Mortgage-backed. In addition to that, Gabelli Healthcare is 1.91 times more volatile than Pace Mortgage Backed Securities. It trades about -0.01 of its total potential returns per unit of risk. Pace Mortgage Backed Securities is currently generating about 0.02 per unit of volatility. If you would invest  979.00  in Pace Mortgage Backed Securities on October 26, 2024 and sell it today you would earn a total of  36.00  from holding Pace Mortgage Backed Securities or generate 3.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

The Gabelli Healthcare  vs.  Pace Mortgage Backed Securitie

The Gabelli Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gabelli Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pace Mortgage Backed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pace Mortgage Backed Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace Mortgage-backed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gabelli Healthcare and Pace Mortgage-backed

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

The idea behind The Gabelli Healthcare and Pace Mortgage Backed Securities 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.