Correlation Between Gabelli Healthcare and New World

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

Diversification Opportunities for Gabelli Healthcare and New World

0.9

Correlation Coefficient

Gabelli Healthcare  New World

Almost no diversification

The 3 months correlation between Gabelli and New is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Healthcare and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Gabelli Healthcare i.e., Gabelli Healthcare and New World go up and down completely randomly.

Pair Corralation between Gabelli Healthcare and New World

Assuming the 90 days horizon The Gabelli Healthcare is expected to under-perform the New World. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Gabelli Healthcare is 1.04 times less risky than New World. The mutual fund trades about -0.34 of its potential returns per unit of risk. The New World Fund is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest  8,187  in New World Fund on October 11, 2024 and sell it today you would lose (449.00) from holding New World Fund or give up 5.48% of portfolio value over 90 days.

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

The Gabelli Healthcare  vs.  New World Fund

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 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.

New World Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New World 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 Gabelli Healthcare and New World

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

The idea behind The Gabelli Healthcare and New World 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.