Correlation Between Gamco Natural and Metropolitan West

Can any of the company-specific risk be diversified away by investing in both Gamco Natural and Metropolitan West 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 Metropolitan West 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 Metropolitan West Investment, you can compare the effects of market volatilities on Gamco Natural and Metropolitan West 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 Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamco Natural and Metropolitan West.

Diversification Opportunities for Gamco Natural and Metropolitan West

0.28

Correlation Coefficient

Gamco Natural  Metropolitan West

Modest diversification

The 3 months correlation between Gamco and Metropolitan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Metropolitan West Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West 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 Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West has no effect on the direction of Gamco Natural i.e., Gamco Natural and Metropolitan West go up and down completely randomly.

Pair Corralation between Gamco Natural and Metropolitan West

Assuming the 90 days horizon Gamco Natural Resources is expected to generate 2.58 times more return on investment than Metropolitan West. However, Gamco Natural is 2.58 times more volatile than Metropolitan West Investment. It trades about -0.02 of its potential returns per unit of risk. Metropolitan West Investment is currently generating about -0.09 per unit of risk. If you would invest  651.00  in Gamco Natural Resources on September 13, 2024 and sell it today you would lose (7.00) from holding Gamco Natural Resources or give up 1.08% of portfolio value over 90 days.

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

Gamco Natural Resources  vs.  Metropolitan West Investment

Gamco Natural Resources

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Gamco Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. 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.

Metropolitan West

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan West Investment has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Metropolitan West 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 Natural and Metropolitan West

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

The idea behind Gamco Natural Resources and Metropolitan West Investment 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.