Correlation Between Benchmark Electronics and Gladstone Investment

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

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

Diversification Opportunities for Benchmark Electronics and Gladstone Investment

0.48

Correlation Coefficient

Benchmark Electronics  Gladstone Investment

Very weak diversification

The 3 months correlation between Benchmark and Gladstone is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and Gladstone Investment go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Gladstone Investment

Assuming the 90 days horizon Benchmark Electronics is expected to generate 1.7 times more return on investment than Gladstone Investment. However, Benchmark Electronics is 1.7 times more volatile than Gladstone Investment. It trades about 0.1 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.04 per unit of risk. If you would invest  2,251  in Benchmark Electronics on September 23, 2024 and sell it today you would earn a total of  2,149  from holding Benchmark Electronics or generate 95.47% return on investment over 90 days.

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

Benchmark Electronics  vs.  Gladstone Investment

Benchmark Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Benchmark Electronics and Gladstone Investment

The main advantage of trading using opposite Benchmark Electronics and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.