Correlation Between Gladstone Investment and S A P

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

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

Diversification Opportunities for Gladstone Investment and S A P

0.75

Correlation Coefficient

Gladstone Investment  S A P

Poor diversification

The 3 months correlation between Gladstone and SAP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and S A P go up and down completely randomly.

Pair Corralation between Gladstone Investment and S A P

Assuming the 90 days horizon Gladstone Investment is expected to generate 2.44 times less return on investment than S A P. But when comparing it to its historical volatility, Gladstone Investment is 1.04 times less risky than S A P. It trades about 0.03 of its potential returns per unit of risk. SAP SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  23,630  in SAP SE on December 28, 2024 and sell it today you would earn a total of  1,295  from holding SAP SE or generate 5.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Gladstone Investment  vs.  SAP SE

Gladstone Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gladstone Investment is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SAP SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, S A P is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gladstone Investment and S A P

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

The idea behind Gladstone Investment and SAP SE 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.