Correlation Between Gladstone Investment and INVITATION HOMES

Can any of the company-specific risk be diversified away by investing in both Gladstone Investment and INVITATION HOMES 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 Gladstone Investment and INVITATION HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gladstone Investment and INVITATION HOMES DL, you can compare the effects of market volatilities on Gladstone Investment and INVITATION HOMES 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 Gladstone Investment with a short position of INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and INVITATION HOMES.

Diversification Opportunities for Gladstone Investment and INVITATION HOMES

-0.38

Correlation Coefficient

Gladstone Investment  INVITATION HOMES

Very good diversification

The 3 months correlation between Gladstone and INVITATION is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES and Gladstone Investment 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 Gladstone Investment are associated (or correlated) with INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and INVITATION HOMES go up and down completely randomly.

Pair Corralation between Gladstone Investment and INVITATION HOMES

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.32 times more return on investment than INVITATION HOMES. However, Gladstone Investment is 1.32 times more volatile than INVITATION HOMES DL. It trades about 0.14 of its potential returns per unit of risk. INVITATION HOMES DL is currently generating about -0.01 per unit of risk. If you would invest  1,085  in Gladstone Investment on September 2, 2024 and sell it today you would earn a total of  216.00  from holding Gladstone Investment or generate 19.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gladstone Investment  vs.  INVITATION HOMES DL

Gladstone Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment reported solid returns over the last few months and may actually be approaching a breakup point.

INVITATION HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gladstone Investment and INVITATION HOMES

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

The idea behind Gladstone Investment and INVITATION HOMES DL 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.