Correlation Between General American and GAMCO Global

Can any of the company-specific risk be diversified away by investing in both General American and GAMCO 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 General American and GAMCO Global 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 GAMCO Global Gold, you can compare the effects of market volatilities on General American and GAMCO 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 General American with a short position of GAMCO Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and GAMCO Global.

Diversification Opportunities for General American and GAMCO Global

0.96

Correlation Coefficient

General American  GAMCO Global

Almost no diversification

The 3 months correlation between General and GAMCO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and GAMCO Global Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Global Gold 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 GAMCO Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Global Gold has no effect on the direction of General American i.e., General American and GAMCO Global go up and down completely randomly.

Pair Corralation between General American and GAMCO Global

Assuming the 90 days trading horizon General American Investors is expected to generate 0.67 times more return on investment than GAMCO Global. However, General American Investors is 1.49 times less risky than GAMCO Global. It trades about 0.02 of its potential returns per unit of risk. GAMCO Global Gold is currently generating about 0.01 per unit of risk. If you would invest  2,590  in General American Investors on July 18, 2024 and sell it today you would earn a total of  7.00  from holding General American Investors or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

General American Investors  vs.  GAMCO Global Gold

General American Inv

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General American Investors are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, General American is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

GAMCO Global Gold

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMCO Global Gold are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, GAMCO Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General American and GAMCO Global

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

The idea behind General American Investors and GAMCO Global Gold 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 Stocks Directory module to find actively traded stocks across global markets.