Correlation Between Gladstone Investment and PENN NATL

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

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

Diversification Opportunities for Gladstone Investment and PENN NATL

0.76

Correlation Coefficient

Gladstone Investment  PENN NATL

Poor diversification

The 3 months correlation between Gladstone and PENN is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and PENN NATL go up and down completely randomly.

Pair Corralation between Gladstone Investment and PENN NATL

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.51 times more return on investment than PENN NATL. However, Gladstone Investment is 1.96 times less risky than PENN NATL. It trades about 0.01 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.05 per unit of risk. If you would invest  1,240  in Gladstone Investment on December 27, 2024 and sell it today you would earn a total of  4.00  from holding Gladstone Investment or generate 0.32% return on investment over 90 days.

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

Gladstone Investment  vs.  PENN NATL GAMING

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.

PENN NATL GAMING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Gladstone Investment and PENN NATL

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

The idea behind Gladstone Investment and PENN NATL GAMING 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.