Correlation Between Equus Total and Gladstone Investment

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

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

Diversification Opportunities for Equus Total and Gladstone Investment

-0.48

Correlation Coefficient

Equus Total  Gladstone Investment

Very good diversification

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

Pair Corralation between Equus Total and Gladstone Investment

Considering the 90-day investment horizon Equus Total Return is expected to under-perform the Gladstone Investment. In addition to that, Equus Total is 3.8 times more volatile than Gladstone Investment. It trades about -0.01 of its total potential returns per unit of risk. Gladstone Investment is currently generating about 0.05 per unit of volatility. If you would invest  2,100  in Gladstone Investment on October 22, 2024 and sell it today you would earn a total of  350.00  from holding Gladstone Investment or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Equus Total Return  vs.  Gladstone Investment

Equus Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equus Total Return has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Equus Total is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of very healthy basic indicators, Gladstone Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Equus Total and Gladstone Investment

The main advantage of trading using opposite Equus Total and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equus Total 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 Equus Total Return 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.