Correlation Between Gladstone Investment and Mastercard

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

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

Diversification Opportunities for Gladstone Investment and Mastercard

0.2

Correlation Coefficient

Gladstone Investment  Mastercard

Modest diversification

The 3 months correlation between Gladstone and Mastercard is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Mastercard go up and down completely randomly.

Pair Corralation between Gladstone Investment and Mastercard

Assuming the 90 days horizon Gladstone Investment is expected to under-perform the Mastercard. In addition to that, Gladstone Investment is 1.29 times more volatile than Mastercard. It trades about 0.0 of its total potential returns per unit of risk. Mastercard is currently generating about 0.11 per unit of volatility. If you would invest  46,974  in Mastercard on October 25, 2024 and sell it today you would earn a total of  3,926  from holding Mastercard or generate 8.36% 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.  Mastercard

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.

Mastercard

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gladstone Investment and Mastercard

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

The idea behind Gladstone Investment and Mastercard 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.