Correlation Between Applied Materials and Gladstone Investment

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

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

Diversification Opportunities for Applied Materials and Gladstone Investment

-0.19

Correlation Coefficient

Applied Materials  Gladstone Investment

Good diversification

The 3 months correlation between Applied and Gladstone is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Applied Materials 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 Applied Materials are associated (or correlated) with Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Applied Materials i.e., Applied Materials and Gladstone Investment go up and down completely randomly.

Pair Corralation between Applied Materials and Gladstone Investment

Assuming the 90 days horizon Applied Materials is expected to under-perform the Gladstone Investment. In addition to that, Applied Materials is 1.5 times more volatile than Gladstone Investment. It trades about -0.06 of its total potential returns per unit of risk. Gladstone Investment is currently generating about 0.07 per unit of volatility. If you would invest  1,207  in Gladstone Investment on October 7, 2024 and sell it today you would earn a total of  85.00  from holding Gladstone Investment or generate 7.04% return on investment over 90 days.

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

Applied Materials  vs.  Gladstone Investment

Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gladstone Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Applied Materials and Gladstone Investment

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

The idea behind Applied Materials and Gladstone Investment 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.