Correlation Between GAMCO Natural and Ellsworth Growth

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

By analyzing existing cross correlation between GAMCO Natural Resources and Ellsworth Growth and, you can compare the effects of market volatilities on GAMCO Natural and Ellsworth Growth 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 GAMCO Natural with a short position of Ellsworth Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMCO Natural and Ellsworth Growth.

Diversification Opportunities for GAMCO Natural and Ellsworth Growth

0.58

Correlation Coefficient

GAMCO Natural  Ellsworth Growth

Very weak diversification

The 3 months correlation between GAMCO and Ellsworth is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding GAMCO Natural Resources and Ellsworth Growth and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellsworth Growth and GAMCO Natural 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 GAMCO Natural Resources are associated (or correlated) with Ellsworth Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellsworth Growth has no effect on the direction of GAMCO Natural i.e., GAMCO Natural and Ellsworth Growth go up and down completely randomly.

Pair Corralation between GAMCO Natural and Ellsworth Growth

Assuming the 90 days trading horizon GAMCO Natural Resources is expected to under-perform the Ellsworth Growth. But the preferred stock apears to be less risky and, when comparing its historical volatility, GAMCO Natural Resources is 2.04 times less risky than Ellsworth Growth. The preferred stock trades about -0.22 of its potential returns per unit of risk. The Ellsworth Growth and is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,341  in Ellsworth Growth and on September 23, 2024 and sell it today you would lose (71.00) from holding Ellsworth Growth and or give up 3.03% of portfolio value over 90 days.

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

GAMCO Natural Resources  vs.  Ellsworth Growth and

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ellsworth Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ellsworth Growth and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Ellsworth Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GAMCO Natural and Ellsworth Growth

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

The idea behind GAMCO Natural Resources and Ellsworth Growth and 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.