Can any of the company-specific risk be diversified away by investing in both Gabelli Equity and DUNHAM REAL 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 Equity and DUNHAM REAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gabelli Equity Trust and DUNHAM REAL ESTATE, you can compare the effects of market volatilities on Gabelli Equity and DUNHAM REAL 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 Equity with a short position of DUNHAM REAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gabelli Equity and DUNHAM REAL.
Diversification Opportunities for Gabelli Equity and DUNHAM REAL
The 3 months correlation between Gabelli and DUNHAM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gabelli Equity Trust and DUNHAM REAL ESTATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUNHAM REAL ESTATE and Gabelli Equity 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 Gabelli Equity Trust are associated (or correlated) with DUNHAM REAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUNHAM REAL ESTATE has no effect on the direction of Gabelli Equity i.e., Gabelli Equity and DUNHAM REAL go up and down completely randomly.
Pair Corralation between Gabelli Equity and DUNHAM REAL
Considering the 90-day investment horizon Gabelli Equity Trust is expected to generate 0.74 times more return on investment than DUNHAM REAL. However, Gabelli Equity Trust is 1.36 times less risky than DUNHAM REAL. It trades about -0.11 of its potential returns per unit of risk. DUNHAM REAL ESTATE is currently generating about -0.19 per unit of risk. If you would invest 532.00 in Gabelli Equity Trust on July 5, 2023 and sell it today you would lose (20.00) from holding Gabelli Equity Trust or give up 3.76% of portfolio value over 90 days.
Over the last 90 days Gabelli Equity Trust has generated negative risk-adjusted returns adding no value to fund investors. Despite latest abnormal 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.
Over the last 90 days DUNHAM REAL ESTATE has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unsteady performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Gabelli Equity and DUNHAM REAL Volatility Contrast
Predicted Return Density
Pair Trading with Gabelli Equity and DUNHAM REAL
The main advantage of trading using opposite Gabelli Equity and DUNHAM REAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gabelli Equity position performs unexpectedly, DUNHAM REAL 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 DUNHAM REAL will offset losses from the drop in DUNHAM REAL's long position.
The idea behind Gabelli Equity Trust and DUNHAM REAL ESTATE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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