Correlation Between DTF Tax and Gabelli Utility

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

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

Diversification Opportunities for DTF Tax and Gabelli Utility

-0.07

Correlation Coefficient

DTF Tax  Gabelli Utility

Good diversification

The 3 months correlation between DTF and Gabelli is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding DTF Tax Free and The Gabelli Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Utility and DTF Tax 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 DTF Tax Free are associated (or correlated) with Gabelli Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Utility has no effect on the direction of DTF Tax i.e., DTF Tax and Gabelli Utility go up and down completely randomly.

Pair Corralation between DTF Tax and Gabelli Utility

Considering the 90-day investment horizon DTF Tax is expected to generate 1.76 times less return on investment than Gabelli Utility. But when comparing it to its historical volatility, DTF Tax Free is 1.56 times less risky than Gabelli Utility. It trades about 0.06 of its potential returns per unit of risk. The Gabelli Utility is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,309  in The Gabelli Utility on September 30, 2024 and sell it today you would earn a total of  120.00  from holding The Gabelli Utility or generate 5.2% return on investment over 90 days.

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

DTF Tax Free  vs.  The Gabelli Utility

DTF Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTF Tax Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gabelli Utility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Utility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gabelli Utility is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DTF Tax and Gabelli Utility

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

The idea behind DTF Tax Free and The Gabelli Utility 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.