Correlation Between Largecap and Gabelli Equity

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

By analyzing existing cross correlation between Largecap Sp 500 and Gabelli Equity Trust, you can compare the effects of market volatilities on Largecap 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 Largecap with a short position of Gabelli Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largecap and Gabelli Equity.

Diversification Opportunities for Largecap and Gabelli Equity

0.89

Correlation Coefficient

Largecap  Gabelli Equity

Very poor diversification

The 3 months correlation between Largecap and Gabelli is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Sp 500 and Gabelli Equity Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity Trust and Largecap 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 Largecap Sp 500 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 Trust has no effect on the direction of Largecap i.e., Largecap and Gabelli Equity go up and down completely randomly.

Pair Corralation between Largecap and Gabelli Equity

Assuming the 90 days horizon Largecap Sp 500 is expected to generate 0.8 times more return on investment than Gabelli Equity. However, Largecap Sp 500 is 1.25 times less risky than Gabelli Equity. It trades about 0.18 of its potential returns per unit of risk. Gabelli Equity Trust is currently generating about 0.08 per unit of risk. If you would invest  2,777  in Largecap Sp 500 on September 15, 2024 and sell it today you would earn a total of  214.00  from holding Largecap Sp 500 or generate 7.71% return on investment over 90 days.

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

Largecap Sp 500  vs.  Gabelli Equity Trust

Largecap Sp 500

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Sp 500 are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Largecap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gabelli Equity Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 6 (%) 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.

Pair Trading with Largecap and Gabelli Equity

The main advantage of trading using opposite Largecap and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Largecap 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 Largecap Sp 500 and Gabelli Equity Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.