Correlation Between Gladstone Investment and Cisco Systems

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

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

Diversification Opportunities for Gladstone Investment and Cisco Systems

0.83

Correlation Coefficient

Gladstone Investment  Cisco Systems

Very poor diversification

The 3 months correlation between Gladstone and Cisco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Cisco Systems go up and down completely randomly.

Pair Corralation between Gladstone Investment and Cisco Systems

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.13 times more return on investment than Cisco Systems. However, Gladstone Investment is 1.13 times more volatile than Cisco Systems. It trades about 0.02 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.02 per unit of risk. If you would invest  1,241  in Gladstone Investment on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Gladstone Investment or generate 1.29% return on investment over 90 days.

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

Gladstone Investment  vs.  Cisco Systems

Gladstone Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gladstone Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cisco Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cisco Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gladstone Investment and Cisco Systems

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

The idea behind Gladstone Investment and Cisco Systems 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.