Correlation Between Fidus Investment and Gladstone Capital

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

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

Diversification Opportunities for Fidus Investment and Gladstone Capital

0.59

Correlation Coefficient

Fidus Investment  Gladstone Capital

Very weak diversification

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

Pair Corralation between Fidus Investment and Gladstone Capital

Given the investment horizon of 90 days Fidus Investment Corp is expected to generate 0.71 times more return on investment than Gladstone Capital. However, Fidus Investment Corp is 1.41 times less risky than Gladstone Capital. It trades about 0.05 of its potential returns per unit of risk. Gladstone Capital is currently generating about 0.01 per unit of risk. If you would invest  2,004  in Fidus Investment Corp on December 23, 2024 and sell it today you would earn a total of  48.00  from holding Fidus Investment Corp or generate 2.4% return on investment over 90 days.

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

Fidus Investment Corp  vs.  Gladstone Capital

Fidus Investment Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidus Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Gladstone Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gladstone Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gladstone Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fidus Investment and Gladstone Capital

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

The idea behind Fidus Investment Corp and Gladstone Capital 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.