Correlation Between Tweedy Browne and Gabelli Equity

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

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

Diversification Opportunities for Tweedy Browne and Gabelli Equity

-0.33

Correlation Coefficient

Tweedy Browne  Gabelli Equity

Very good diversification

The 3 months correlation between Tweedy and Gabelli is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tweedy Browne Value 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 Tweedy Browne 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 Tweedy Browne Value 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 Tweedy Browne i.e., Tweedy Browne and Gabelli Equity go up and down completely randomly.

Pair Corralation between Tweedy Browne and Gabelli Equity

Assuming the 90 days horizon Tweedy Browne Value is expected to under-perform the Gabelli Equity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Tweedy Browne Value is 1.3 times less risky than Gabelli Equity. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Gabelli Equity Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  535.00  in Gabelli Equity Trust on September 2, 2024 and sell it today you would earn a total of  44.00  from holding Gabelli Equity Trust or generate 8.22% return on investment over 90 days.

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

Tweedy Browne Value  vs.  Gabelli Equity Trust

Tweedy Browne Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gabelli Equity Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat uncertain basic indicators, Gabelli Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tweedy Browne and Gabelli Equity

The main advantage of trading using opposite Tweedy Browne and Gabelli Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tweedy Browne 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 Tweedy Browne Value 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.