Correlation Between Gabelli Equity and Transamerica Small/mid

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

By analyzing existing cross correlation between Gabelli Equity Trust and Transamerica Smallmid Cap, you can compare the effects of market volatilities on Gabelli Equity and Transamerica Small/mid 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 Transamerica Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Equity and Transamerica Small/mid.

Diversification Opportunities for Gabelli Equity and Transamerica Small/mid

0.88

Correlation Coefficient

Gabelli Equity  Transamerica Small/mid

Very poor diversification

The 3 months correlation between Gabelli and Transamerica is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gabelli Equity Trust and Transamerica Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Smallmid Cap 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 Gabelli Equity Trust are associated (or correlated) with Transamerica Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Smallmid Cap has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and Transamerica Small/mid go up and down completely randomly.

Pair Corralation between Gabelli Equity and Transamerica Small/mid

Considering the 90-day investment horizon Gabelli Equity Trust is expected to generate 0.76 times more return on investment than Transamerica Small/mid. However, Gabelli Equity Trust is 1.32 times less risky than Transamerica Small/mid. It trades about 0.35 of its potential returns per unit of risk. Transamerica Smallmid Cap is currently generating about 0.24 per unit of risk. If you would invest  542.00  in Gabelli Equity Trust on August 30, 2024 and sell it today you would earn a total of  35.00  from holding Gabelli Equity Trust or generate 6.46% return on investment over 90 days.

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

Gabelli Equity Trust  vs.  Transamerica Smallmid Cap

Gabelli Equity Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Gabelli Equity is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Transamerica Smallmid Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Smallmid Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Transamerica Small/mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gabelli Equity and Transamerica Small/mid

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

The idea behind Gabelli Equity Trust and Transamerica Smallmid Cap 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.