Correlation Between Vanguard Total and Gamco Natural

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Gamco Natural 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 Vanguard Total and Gamco Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Total Stock and Gamco Natural Resources, you can compare the effects of market volatilities on Vanguard Total and Gamco Natural 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 Vanguard Total with a short position of Gamco Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Gamco Natural.

Diversification Opportunities for Vanguard Total and Gamco Natural

0.44

Correlation Coefficient

Vanguard Total  Gamco Natural

Very weak diversification

The 3 months correlation between Vanguard and Gamco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Gamco Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Natural Resources and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with Gamco Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Natural Resources has no effect on the direction of Vanguard Total i.e., Vanguard Total and Gamco Natural go up and down completely randomly.

Pair Corralation between Vanguard Total and Gamco Natural

Assuming the 90 days horizon Vanguard Total Stock is expected to generate 1.12 times more return on investment than Gamco Natural. However, Vanguard Total is 1.12 times more volatile than Gamco Natural Resources. It trades about 0.41 of its potential returns per unit of risk. Gamco Natural Resources is currently generating about 0.34 per unit of risk. If you would invest  12,045  in Vanguard Total Stock on February 22, 2024 and sell it today you would earn a total of  757.00  from holding Vanguard Total Stock or generate 6.28% return on investment over 90 days.

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

Vanguard Total Stock  vs.  Gamco Natural Resources

Vanguard Total Stock

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gamco Natural Resources

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Natural Resources are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gamco Natural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Total and Gamco Natural

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

The idea behind Vanguard Total Stock and Gamco Natural Resources 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.