Correlation Between Gamco Global and Ab Small

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

By analyzing existing cross correlation between Gamco Global Gold and Ab Small Cap, you can compare the effects of market volatilities on Gamco Global and Ab Small 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 Global with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamco Global and Ab Small.

Diversification Opportunities for Gamco Global and Ab Small

-0.22

Correlation Coefficient

Gamco Global  Ab Small

Very good diversification

The 3 months correlation between Gamco and SCYVX is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Global Gold and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Gamco Global 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 Global Gold are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Gamco Global i.e., Gamco Global and Ab Small go up and down completely randomly.

Pair Corralation between Gamco Global and Ab Small

Assuming the 90 days horizon Gamco Global Gold is expected to generate 0.81 times more return on investment than Ab Small. However, Gamco Global Gold is 1.24 times less risky than Ab Small. It trades about -0.36 of its potential returns per unit of risk. Ab Small Cap is currently generating about -0.43 per unit of risk. If you would invest  415.00  in Gamco Global Gold on September 24, 2024 and sell it today you would lose (31.00) from holding Gamco Global Gold or give up 7.47% of portfolio value over 90 days.

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

Gamco Global Gold  vs.  Ab Small Cap

Gamco Global Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamco Global Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Ab Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab Small 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 Global and Ab Small

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

The idea behind Gamco Global Gold and Ab Small Cap 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.