Correlation Between Gladstone Investment and Scandinavian Tobacco

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

By analyzing existing cross correlation between Gladstone Investment and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Gladstone Investment and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and Scandinavian Tobacco.

Diversification Opportunities for Gladstone Investment and Scandinavian Tobacco

-0.52

Correlation Coefficient

Gladstone Investment  Scandinavian Tobacco

Excellent diversification

The 3 months correlation between Gladstone and Scandinavian is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between Gladstone Investment and Scandinavian Tobacco

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.37 times more return on investment than Scandinavian Tobacco. However, Gladstone Investment is 1.37 times more volatile than Scandinavian Tobacco Group. It trades about 0.14 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.09 per unit of risk. If you would invest  1,084  in Gladstone Investment on September 3, 2024 and sell it today you would earn a total of  217.00  from holding Gladstone Investment or generate 20.02% return on investment over 90 days.

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

Gladstone Investment  vs.  Scandinavian Tobacco Group

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.

Scandinavian Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian Tobacco Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gladstone Investment and Scandinavian Tobacco

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

The idea behind Gladstone Investment and Scandinavian Tobacco Group 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.