Correlation Between SPDR Morgan and GAMCO Natural

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

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

Diversification Opportunities for SPDR Morgan and GAMCO Natural

0.15

Correlation Coefficient

SPDR Morgan  GAMCO Natural

Average diversification

The 3 months correlation between SPDR and GAMCO is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morgan Stanley and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources and SPDR Morgan 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 SPDR Morgan Stanley are associated (or correlated) with GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of SPDR Morgan i.e., SPDR Morgan and GAMCO Natural go up and down completely randomly.

Pair Corralation between SPDR Morgan and GAMCO Natural

Given the investment horizon of 90 days SPDR Morgan is expected to generate 6.38 times less return on investment than GAMCO Natural. In addition to that, SPDR Morgan is 1.85 times more volatile than GAMCO Natural Resources. It trades about 0.01 of its total potential returns per unit of risk. GAMCO Natural Resources is currently generating about 0.18 per unit of volatility. If you would invest  488.00  in GAMCO Natural Resources on January 29, 2024 and sell it today you would earn a total of  41.00  from holding GAMCO Natural Resources or generate 8.4% return on investment over 90 days.

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

SPDR Morgan Stanley  vs.  GAMCO Natural Resources

SPDR Morgan Stanley

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Morgan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

GAMCO Natural Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Natural Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, GAMCO Natural may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with SPDR Morgan and GAMCO Natural

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

The idea behind SPDR Morgan Stanley and GAMCO Natural Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.