Correlation Between Short Duration and Gabelli Value

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

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

Diversification Opportunities for Short Duration and Gabelli Value

0.13

Correlation Coefficient

Short Duration  Gabelli Value

Average diversification

The 3 months correlation between Short and Gabelli is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and The Gabelli Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Value and Short Duration 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 Short Duration Inflation are associated (or correlated) with Gabelli Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Value has no effect on the direction of Short Duration i.e., Short Duration and Gabelli Value go up and down completely randomly.

Pair Corralation between Short Duration and Gabelli Value

Assuming the 90 days horizon Short Duration is expected to generate 66.06 times less return on investment than Gabelli Value. But when comparing it to its historical volatility, Short Duration Inflation is 4.95 times less risky than Gabelli Value. It trades about 0.01 of its potential returns per unit of risk. The Gabelli Value is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,041  in The Gabelli Value on September 13, 2024 and sell it today you would earn a total of  70.00  from holding The Gabelli Value or generate 6.72% return on investment over 90 days.

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

Short Duration Inflation  vs.  The Gabelli Value

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Insignificant

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

Gabelli Value

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Value 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 Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Short Duration and Gabelli Value

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

The idea behind Short Duration Inflation and The Gabelli Value 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.