Correlation Between Vanguard Financials and Gabelli Global

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

By analyzing existing cross correlation between Vanguard Financials Index and Gabelli Global Financial, you can compare the effects of market volatilities on Vanguard Financials and Gabelli Global 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 Vanguard Financials with a short position of Gabelli Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Gabelli Global.

Diversification Opportunities for Vanguard Financials and Gabelli Global

0.92

Correlation Coefficient

Vanguard Financials  Gabelli Global

Almost no diversification

The 3 months correlation between Vanguard and Gabelli is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Gabelli Global Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Global Financial and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with Gabelli Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Global Financial has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Gabelli Global go up and down completely randomly.

Pair Corralation between Vanguard Financials and Gabelli Global

Assuming the 90 days horizon Vanguard Financials Index is expected to under-perform the Gabelli Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Financials Index is 1.24 times less risky than Gabelli Global. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Gabelli Global Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Gabelli Global Financial on February 5, 2024 and sell it today you would earn a total of  5.00  from holding Gabelli Global Financial or generate 0.37% return on investment over 90 days.

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

Vanguard Financials Index  vs.  Gabelli Global Financial

Vanguard Financials Index

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Financials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gabelli Global Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Global Financial are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gabelli Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Vanguard Financials and Gabelli Global

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

The idea behind Vanguard Financials Index and Gabelli Global Financial 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.