Correlation Between Gladstone Investment and Lancashire Holdings

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

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

Diversification Opportunities for Gladstone Investment and Lancashire Holdings

-0.04

Correlation Coefficient

Gladstone Investment  Lancashire Holdings

Good diversification

The 3 months correlation between Gladstone and Lancashire is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Lancashire Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings 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 Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Gladstone Investment and Lancashire Holdings

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.76 times more return on investment than Lancashire Holdings. However, Gladstone Investment is 1.31 times less risky than Lancashire Holdings. It trades about -0.01 of its potential returns per unit of risk. Lancashire Holdings Limited is currently generating about -0.13 per unit of risk. If you would invest  1,267  in Gladstone Investment on December 23, 2024 and sell it today you would lose (19.00) from holding Gladstone Investment or give up 1.5% of portfolio value over 90 days.

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

Gladstone Investment  vs.  Lancashire Holdings Limited

Gladstone Investment

Risk-Adjusted Performance

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.

Lancashire Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lancashire Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gladstone Investment and Lancashire Holdings

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

The idea behind Gladstone Investment and Lancashire Holdings Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.