Correlation Between International Equity and Gamco Global

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

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

Diversification Opportunities for International Equity and Gamco Global

0.5

Correlation Coefficient

International Equity  Gamco Global

Very weak diversification

The 3 months correlation between International and Gamco is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Investor and The Gamco Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamco Global and International 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 International Equity Investor are associated (or correlated) with Gamco Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamco Global has no effect on the direction of International Equity i.e., International Equity and Gamco Global go up and down completely randomly.

Pair Corralation between International Equity and Gamco Global

Assuming the 90 days horizon International Equity Investor is expected to under-perform the Gamco Global. In addition to that, International Equity is 1.2 times more volatile than The Gamco Global. It trades about -0.03 of its total potential returns per unit of risk. The Gamco Global is currently generating about 0.07 per unit of volatility. If you would invest  2,601  in The Gamco Global on August 31, 2024 and sell it today you would earn a total of  75.00  from holding The Gamco Global or generate 2.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

International Equity Investor  vs.  The Gamco Global

International Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gamco Global

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gamco Global are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Gamco Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Equity and Gamco Global

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

The idea behind International Equity Investor and The Gamco Global 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.