Correlation Between International Growth and Gamco Natural
Can any of the company-specific risk be diversified away by investing in both International Growth 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 International Growth and Gamco Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Growth Fund and Gamco Natural Resources, you can compare the effects of market volatilities on International Growth 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 International Growth with a short position of Gamco Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and Gamco Natural.
Diversification Opportunities for International Growth and Gamco Natural
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between International and Gamco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund 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 International Growth 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 International Growth Fund 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 International Growth i.e., International Growth and Gamco Natural go up and down completely randomly.
Pair Corralation between International Growth and Gamco Natural
Assuming the 90 days horizon International Growth is expected to generate 1.1 times less return on investment than Gamco Natural. In addition to that, International Growth is 1.06 times more volatile than Gamco Natural Resources. It trades about 0.02 of its total potential returns per unit of risk. Gamco Natural Resources is currently generating about 0.03 per unit of volatility. If you would invest 605.00 in Gamco Natural Resources on September 2, 2024 and sell it today you would earn a total of 41.00 from holding Gamco Natural Resources or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. Gamco Natural Resources
Performance |
| Timeline |
| International Growth |
| Gamco Natural Resources |
International Growth and Gamco Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and Gamco Natural
The main advantage of trading using opposite International Growth and Gamco Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth 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 International Growth Fund 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.
| Gamco Natural vs. Vanguard Total Stock | Gamco Natural vs. Vanguard 500 Index | Gamco Natural vs. Vanguard Total Stock | Gamco Natural vs. Vanguard Total Stock |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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