Correlation Between Gladstone Investment and Weyerhaeuser

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

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

Diversification Opportunities for Gladstone Investment and Weyerhaeuser

0.59

Correlation Coefficient

Gladstone Investment  Weyerhaeuser

Very weak diversification

The 3 months correlation between Gladstone and Weyerhaeuser is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser 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 Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Weyerhaeuser go up and down completely randomly.

Pair Corralation between Gladstone Investment and Weyerhaeuser

Assuming the 90 days horizon Gladstone Investment is expected to generate 2.04 times less return on investment than Weyerhaeuser. In addition to that, Gladstone Investment is 1.13 times more volatile than Weyerhaeuser. It trades about 0.01 of its total potential returns per unit of risk. Weyerhaeuser is currently generating about 0.03 per unit of volatility. If you would invest  2,680  in Weyerhaeuser on December 25, 2024 and sell it today you would earn a total of  60.00  from holding Weyerhaeuser or generate 2.24% return on investment over 90 days.

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

Gladstone Investment  vs.  Weyerhaeuser

Gladstone Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Weyerhaeuser

Risk-Adjusted Performance

Weak

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

Pair Trading with Gladstone Investment and Weyerhaeuser

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

The idea behind Gladstone Investment and Weyerhaeuser 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.