Correlation Between Gladstone Investment and Cogent Communications

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

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

Diversification Opportunities for Gladstone Investment and Cogent Communications

0.66

Correlation Coefficient

Gladstone Investment  Cogent Communications

Poor diversification

The 3 months correlation between Gladstone and Cogent is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications 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 Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Cogent Communications go up and down completely randomly.

Pair Corralation between Gladstone Investment and Cogent Communications

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.74 times more return on investment than Cogent Communications. However, Gladstone Investment is 1.34 times less risky than Cogent Communications. It trades about -0.01 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.08 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Gladstone Investment  vs.  Cogent Communications Holdings

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.

Cogent Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cogent Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gladstone Investment and Cogent Communications

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

The idea behind Gladstone Investment and Cogent Communications Holdings 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.