Correlation Between The Gabelli and American Funds

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

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

Diversification Opportunities for The Gabelli and American Funds

0.84

Correlation Coefficient

The Gabelli  American Funds

Very poor diversification

The 3 months correlation between The and AMERICAN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Focus and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and The Gabelli 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 Focus are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of The Gabelli i.e., The Gabelli and American Funds go up and down completely randomly.

Pair Corralation between The Gabelli and American Funds

Assuming the 90 days horizon The Gabelli Focus is expected to generate 0.88 times more return on investment than American Funds. However, The Gabelli Focus is 1.14 times less risky than American Funds. It trades about 0.2 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.17 per unit of risk. If you would invest  1,662  in The Gabelli Focus on September 2, 2024 and sell it today you would earn a total of  146.00  from holding The Gabelli Focus or generate 8.78% return on investment over 90 days.

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

The Gabelli Focus  vs.  American Funds Growth

Gabelli Focus

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Focus are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, The Gabelli may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Funds Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with The Gabelli and American Funds

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

The idea behind The Gabelli Focus and American Funds Growth 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.