Correlation Between Tri Continental and Gabelli Utility

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

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

Diversification Opportunities for Tri Continental and Gabelli Utility

0.42

Correlation Coefficient

Tri Continental  Gabelli Utility

Very weak diversification

The 3 months correlation between Tri and Gabelli is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tri Continental PFD and The Gabelli Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Utility and Tri Continental 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 Tri Continental PFD are associated (or correlated) with Gabelli Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Utility has no effect on the direction of Tri Continental i.e., Tri Continental and Gabelli Utility go up and down completely randomly.

Pair Corralation between Tri Continental and Gabelli Utility

Given the investment horizon of 90 days Tri Continental PFD is expected to under-perform the Gabelli Utility. In addition to that, Tri Continental is 1.13 times more volatile than The Gabelli Utility. It trades about -0.07 of its total potential returns per unit of risk. The Gabelli Utility is currently generating about 0.01 per unit of volatility. If you would invest  2,432  in The Gabelli Utility on September 23, 2024 and sell it today you would earn a total of  8.00  from holding The Gabelli Utility or generate 0.33% return on investment over 90 days.

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

Tri Continental PFD  vs.  The Gabelli Utility

Tri Continental PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Continental PFD has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tri Continental is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Gabelli Utility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Utility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gabelli Utility is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tri Continental and Gabelli Utility

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

The idea behind Tri Continental PFD and The Gabelli Utility 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.