Correlation Between General American and Ellsworth Growth
Can any of the company-specific risk be diversified away by investing in both General American and Ellsworth Growth 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 General American and Ellsworth Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General American Investors and Ellsworth Growth and, you can compare the effects of market volatilities on General American and Ellsworth Growth 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 General American with a short position of Ellsworth Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and Ellsworth Growth.
Diversification Opportunities for General American and Ellsworth Growth
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Ellsworth is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Ellsworth Growth and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellsworth Growth and General American 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 General American Investors are associated (or correlated) with Ellsworth Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellsworth Growth has no effect on the direction of General American i.e., General American and Ellsworth Growth go up and down completely randomly.
Pair Corralation between General American and Ellsworth Growth
Assuming the 90 days trading horizon General American Investors is expected to under-perform the Ellsworth Growth. But the preferred stock apears to be less risky and, when comparing its historical volatility, General American Investors is 2.55 times less risky than Ellsworth Growth. The preferred stock trades about -0.09 of its potential returns per unit of risk. The Ellsworth Growth and is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,345 in Ellsworth Growth and on September 2, 2024 and sell it today you would earn a total of 58.00 from holding Ellsworth Growth and or generate 2.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
General American Investors vs. Ellsworth Growth and
Performance |
| Timeline |
| General American Inv |
| Ellsworth Growth |
General American and Ellsworth Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General American and Ellsworth Growth
The main advantage of trading using opposite General American and Ellsworth Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American position performs unexpectedly, Ellsworth Growth 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 Ellsworth Growth will offset losses from the drop in Ellsworth Growth's long position.| General American vs. Ellsworth Growth and | General American vs. The Gabelli Equity | General American vs. The Gabelli Utility | General American vs. GAMCO Global Gold |
| Ellsworth Growth vs. The Gabelli Equity | Ellsworth Growth vs. The Gabelli Equity | Ellsworth Growth vs. The Gabelli Utility | Ellsworth Growth vs. Bancroft Fund |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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