Correlation Between Gladstone Investment and HUTCHMED DRC

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

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

Diversification Opportunities for Gladstone Investment and HUTCHMED DRC

-0.36

Correlation Coefficient

Gladstone Investment  HUTCHMED DRC

Very good diversification

The 3 months correlation between Gladstone and HUTCHMED is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and HUTCHMED DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHMED DRC and Gladstone 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 Gladstone Investment are associated (or correlated) with HUTCHMED DRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHMED DRC has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and HUTCHMED DRC go up and down completely randomly.

Pair Corralation between Gladstone Investment and HUTCHMED DRC

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.18 times more return on investment than HUTCHMED DRC. However, Gladstone Investment is 5.45 times less risky than HUTCHMED DRC. It trades about -0.06 of its potential returns per unit of risk. HUTCHMED DRC is currently generating about -0.06 per unit of risk. If you would invest  2,526  in Gladstone Investment on October 25, 2024 and sell it today you would lose (19.00) from holding Gladstone Investment or give up 0.75% of portfolio value over 90 days.

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

Gladstone Investment  vs.  HUTCHMED DRC

Gladstone Investment

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Gladstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Gladstone Investment is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

HUTCHMED DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HUTCHMED DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gladstone Investment and HUTCHMED DRC

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

The idea behind Gladstone Investment and HUTCHMED DRC 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.