Correlation Between Gamco Natural and Western Asset

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

Diversification Opportunities for Gamco Natural and Western Asset

0.59

Correlation Coefficient

Gamco Natural  Western Asset

Very weak diversification

The 3 months correlation between Gamco and Western is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gamco Natural Resources and Western Asset Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Interm 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Interm has no effect on the direction of Gamco Natural i.e., Gamco Natural and Western Asset go up and down completely randomly.

Pair Corralation between Gamco Natural and Western Asset

Assuming the 90 days horizon Gamco Natural Resources is expected to under-perform the Western Asset. In addition to that, Gamco Natural is 6.13 times more volatile than Western Asset Intermediate. It trades about -0.34 of its total potential returns per unit of risk. Western Asset Intermediate is currently generating about -0.35 per unit of volatility. If you would invest  970.00  in Western Asset Intermediate on September 29, 2024 and sell it today you would lose (12.00) from holding Western Asset Intermediate or give up 1.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Gamco Natural Resources  vs.  Western Asset Intermediate

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 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.

Western Asset Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Intermediate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Western Asset 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 Western Asset

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

The idea behind Gamco Natural Resources and Western Asset Intermediate 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.