Correlation Between Gabelli Small and Gabelli Asset

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

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

Diversification Opportunities for Gabelli Small and Gabelli Asset

0.85

Correlation Coefficient

Gabelli Small  Gabelli Asset

Very poor diversification

The 3 months correlation between Gabelli and Gabelli is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Small and The Gabelli Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Asset and Gabelli Small 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 Small are associated (or correlated) with Gabelli Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Asset has no effect on the direction of Gabelli Small i.e., Gabelli Small and Gabelli Asset go up and down completely randomly.

Pair Corralation between Gabelli Small and Gabelli Asset

Assuming the 90 days horizon The Gabelli Small is expected to generate 1.31 times more return on investment than Gabelli Asset. However, Gabelli Small is 1.31 times more volatile than The Gabelli Asset. It trades about 0.08 of its potential returns per unit of risk. The Gabelli Asset is currently generating about 0.08 per unit of risk. If you would invest  3,076  in The Gabelli Small on July 3, 2024 and sell it today you would earn a total of  1,615  from holding The Gabelli Small or generate 52.5% return on investment over 90 days.

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

The Gabelli Small  vs.  The Gabelli Asset

Gabelli Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gabelli Small may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Gabelli Asset

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Asset are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gabelli Asset may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Gabelli Small and Gabelli Asset

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

The idea behind The Gabelli Small and The Gabelli Asset 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.