Correlation Between Gamco Natural and Total Income

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

Diversification Opportunities for Gamco Natural and Total Income

0.75

Correlation Coefficient

Gamco Natural  Total Income

Poor diversification

The 3 months correlation between Gamco and Total is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Total Income Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Income Real 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 Total Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Income Real has no effect on the direction of Gamco Natural i.e., Gamco Natural and Total Income go up and down completely randomly.

Pair Corralation between Gamco Natural and Total Income

Assuming the 90 days horizon Gamco Natural Resources is expected to under-perform the Total Income. In addition to that, Gamco Natural is 12.91 times more volatile than Total Income Real. It trades about -0.03 of its total potential returns per unit of risk. Total Income Real is currently generating about -0.38 per unit of volatility. If you would invest  2,771  in Total Income Real on September 15, 2024 and sell it today you would lose (35.00) from holding Total Income Real or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Gamco Natural Resources  vs.  Total Income Real

Gamco Natural Resources

Risk-Adjusted Performance

0 of 100

Very 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.

Total Income Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Income Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Total Income 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 Total Income

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

The idea behind Gamco Natural Resources and Total Income Real 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.