Correlation Between ALERION CLEANPOWER and Gladstone Investment

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

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

Diversification Opportunities for ALERION CLEANPOWER and Gladstone Investment

0.44

Correlation Coefficient

ALERION CLEANPOWER  Gladstone Investment

Very weak diversification

The 3 months correlation between ALERION and Gladstone is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 ALERION CLEANPOWER i.e., ALERION CLEANPOWER and Gladstone Investment go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and Gladstone Investment

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to generate 1.57 times more return on investment than Gladstone Investment. However, ALERION CLEANPOWER is 1.57 times more volatile than Gladstone Investment. It trades about 0.01 of its potential returns per unit of risk. Gladstone Investment is currently generating about -0.03 per unit of risk. If you would invest  1,542  in ALERION CLEANPOWER on October 20, 2024 and sell it today you would lose (18.00) from holding ALERION CLEANPOWER or give up 1.17% of portfolio value over 90 days.

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

ALERION CLEANPOWER  vs.  Gladstone Investment

ALERION CLEANPOWER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALERION CLEANPOWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALERION CLEANPOWER is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gladstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gladstone Investment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ALERION CLEANPOWER and Gladstone Investment

The main advantage of trading using opposite ALERION CLEANPOWER and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.