Correlation Between Gabelli Multimedia and Gabelli Equity

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

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

Diversification Opportunities for Gabelli Multimedia and Gabelli Equity

0.89

Correlation Coefficient

Gabelli Multimedia  Gabelli Equity

Very poor diversification

The 3 months correlation between Gabelli and Gabelli is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Multimedia and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and Gabelli Multimedia 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 Multimedia 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 Gabelli Multimedia i.e., Gabelli Multimedia and Gabelli Equity go up and down completely randomly.

Pair Corralation between Gabelli Multimedia and Gabelli Equity

Assuming the 90 days trading horizon Gabelli Multimedia is expected to generate 1.75 times less return on investment than Gabelli Equity. But when comparing it to its historical volatility, The Gabelli Multimedia is 1.27 times less risky than Gabelli Equity. It trades about 0.08 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  2,177  in The Gabelli Equity on August 30, 2024 and sell it today you would earn a total of  144.00  from holding The Gabelli Equity or generate 6.61% return on investment over 90 days.

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

The Gabelli Multimedia  vs.  The Gabelli Equity

The Gabelli Multimedia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Multimedia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gabelli Multimedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Gabelli Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Equity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Gabelli Equity may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Gabelli Multimedia and Gabelli Equity

The main advantage of trading using opposite Gabelli Multimedia and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gabelli Multimedia 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 The Gabelli Multimedia 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.