Correlation Between Gladstone Investment and HK Electric

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

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

Diversification Opportunities for Gladstone Investment and HK Electric

0.29

Correlation Coefficient

Gladstone Investment  HK Electric

Modest diversification

The 3 months correlation between Gladstone and HKT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments 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 HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and HK Electric go up and down completely randomly.

Pair Corralation between Gladstone Investment and HK Electric

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.69 times more return on investment than HK Electric. However, Gladstone Investment is 1.69 times more volatile than HK Electric Investments. It trades about 0.02 of its potential returns per unit of risk. HK Electric Investments is currently generating about 0.03 per unit of risk. If you would invest  1,241  in Gladstone Investment on December 30, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gladstone Investment  vs.  HK Electric Investments

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.

HK Electric Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gladstone Investment and HK Electric

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

The idea behind Gladstone Investment and HK Electric Investments 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.