Correlation Between SCE Trust and Gabelli Equity

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

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

Diversification Opportunities for SCE Trust and Gabelli Equity

0.08

Correlation Coefficient

SCE Trust  Gabelli Equity

Significant diversification

The 3 months correlation between SCE and Gabelli is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SCE Trust III and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and SCE Trust 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 SCE Trust III are associated (or correlated) with Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of SCE Trust i.e., SCE Trust and Gabelli Equity go up and down completely randomly.

Pair Corralation between SCE Trust and Gabelli Equity

Assuming the 90 days trading horizon SCE Trust is expected to generate 1.19 times less return on investment than Gabelli Equity. But when comparing it to its historical volatility, SCE Trust III is 1.68 times less risky than Gabelli Equity. It trades about 0.16 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,003  in The Gabelli Equity on September 3, 2024 and sell it today you would earn a total of  307.00  from holding The Gabelli Equity or generate 15.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

SCE Trust III  vs.  The Gabelli Equity

SCE Trust III

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SCE Trust III are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, SCE Trust is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Gabelli Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Gabelli Equity is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SCE Trust and Gabelli Equity

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

The idea behind SCE Trust III and The Gabelli Equity 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.