Correlation Between Gladstone Investment and ITOCHU

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

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

Diversification Opportunities for Gladstone Investment and ITOCHU

-0.29

Correlation Coefficient

Gladstone Investment  ITOCHU

Very good diversification

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

Pair Corralation between Gladstone Investment and ITOCHU

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.49 times less return on investment than ITOCHU. But when comparing it to its historical volatility, Gladstone Investment is 1.17 times less risky than ITOCHU. It trades about 0.05 of its potential returns per unit of risk. ITOCHU is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,941  in ITOCHU on October 4, 2024 and sell it today you would earn a total of  1,905  from holding ITOCHU or generate 64.77% 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.  ITOCHU

Gladstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

ITOCHU

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gladstone Investment and ITOCHU

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

The idea behind Gladstone Investment and ITOCHU 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.