Correlation Between Gabelli Equity and First Trust

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

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

Diversification Opportunities for Gabelli Equity and First Trust

-0.71

Correlation Coefficient

Gabelli Equity  First Trust

Pay attention - limited upside

The 3 months correlation between Gabelli and First is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and Gabelli Equity 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 Equity are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and First Trust go up and down completely randomly.

Pair Corralation between Gabelli Equity and First Trust

Assuming the 90 days trading horizon The Gabelli Equity is expected to under-perform the First Trust. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Gabelli Equity is 1.07 times less risky than First Trust. The preferred stock trades about -0.08 of its potential returns per unit of risk. The First Trust Senior is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,004  in First Trust Senior on September 12, 2024 and sell it today you would earn a total of  31.00  from holding First Trust Senior or generate 3.09% return on investment over 90 days.

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

The Gabelli Equity  vs.  First Trust Senior

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Gabelli Equity is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

First Trust Senior

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gabelli Equity and First Trust

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

The idea behind The Gabelli Equity and First Trust Senior 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.