Correlation Between Gamco Natural and Federated Kaufmann

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

By analyzing existing cross correlation between Gamco Natural Resources and Federated Kaufmann Large, you can compare the effects of market volatilities on Gamco Natural and Federated Kaufmann 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 Natural with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamco Natural and Federated Kaufmann.

Diversification Opportunities for Gamco Natural and Federated Kaufmann

0.04

Correlation Coefficient

Gamco Natural  Federated Kaufmann

Significant diversification

The 3 months correlation between Gamco and Federated is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large and Gamco Natural 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 Natural Resources are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Gamco Natural i.e., Gamco Natural and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Gamco Natural and Federated Kaufmann

Assuming the 90 days horizon Gamco Natural Resources is expected to generate 0.15 times more return on investment than Federated Kaufmann. However, Gamco Natural Resources is 6.53 times less risky than Federated Kaufmann. It trades about 0.01 of its potential returns per unit of risk. Federated Kaufmann Large is currently generating about -0.08 per unit of risk. If you would invest  641.00  in Gamco Natural Resources on September 12, 2024 and sell it today you would earn a total of  3.00  from holding Gamco Natural Resources or generate 0.47% return on investment over 90 days.

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

Gamco Natural Resources  vs.  Federated Kaufmann Large

Gamco Natural Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gamco Natural Resources are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gamco Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Kaufmann Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Kaufmann Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Gamco Natural and Federated Kaufmann

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

The idea behind Gamco Natural Resources and Federated Kaufmann Large 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.