Correlation Between Gabelli Healthcare and Capital World

Can any of the company-specific risk be diversified away by investing in both Gabelli Healthcare and Capital World 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 Gabelli Healthcare and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Gabelli Healthcare and Capital World Bond, you can compare the effects of market volatilities on Gabelli Healthcare and Capital World 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 Gabelli Healthcare with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Healthcare and Capital World.

Diversification Opportunities for Gabelli Healthcare and Capital World

0.85

Correlation Coefficient

Gabelli Healthcare  Capital World

Very poor diversification

The 3 months correlation between Gabelli and Capital is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Healthcare and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Gabelli Healthcare 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 The Gabelli Healthcare are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Gabelli Healthcare i.e., Gabelli Healthcare and Capital World go up and down completely randomly.

Pair Corralation between Gabelli Healthcare and Capital World

Assuming the 90 days horizon The Gabelli Healthcare is expected to under-perform the Capital World. In addition to that, Gabelli Healthcare is 2.15 times more volatile than Capital World Bond. It trades about -0.13 of its total potential returns per unit of risk. Capital World Bond is currently generating about -0.07 per unit of volatility. If you would invest  1,647  in Capital World Bond on September 3, 2024 and sell it today you would lose (27.00) from holding Capital World Bond or give up 1.64% of portfolio value over 90 days.

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

The Gabelli Healthcare  vs.  Capital World Bond

The Gabelli Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Healthcare 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.

Capital World Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital World Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gabelli Healthcare and Capital World

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

The idea behind The Gabelli Healthcare and Capital World Bond 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.