Correlation Between Gladstone Investment and RCM TECHNOLOGIES

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

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

Diversification Opportunities for Gladstone Investment and RCM TECHNOLOGIES

0.71

Correlation Coefficient

Gladstone Investment  RCM TECHNOLOGIES

Poor diversification

The 3 months correlation between Gladstone and RCM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and RCM TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCM TECHNOLOGIES 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 RCM TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCM TECHNOLOGIES has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and RCM TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Gladstone Investment and RCM TECHNOLOGIES

Assuming the 90 days horizon Gladstone Investment is expected to under-perform the RCM TECHNOLOGIES. But the stock apears to be less risky and, when comparing its historical volatility, Gladstone Investment is 1.77 times less risky than RCM TECHNOLOGIES. The stock trades about -0.08 of its potential returns per unit of risk. The RCM TECHNOLOGIES is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,000  in RCM TECHNOLOGIES on September 21, 2024 and sell it today you would earn a total of  160.00  from holding RCM TECHNOLOGIES or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.36%
Values	Daily Returns

Gladstone Investment  vs.  RCM TECHNOLOGIES

Gladstone Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RCM TECHNOLOGIES

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCM TECHNOLOGIES are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, RCM TECHNOLOGIES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gladstone Investment and RCM TECHNOLOGIES

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

The idea behind Gladstone Investment and RCM TECHNOLOGIES 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.