Correlation Between Gladstone Investment and First Eagle

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

By analyzing existing cross correlation between Gladstone Investment and First Eagle Alternative, you can compare the effects of market volatilities on Gladstone Investment and First Eagle 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 First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and First Eagle.

Diversification Opportunities for Gladstone Investment and First Eagle

0.25

Correlation Coefficient

Gladstone Investment  First Eagle

Modest diversification

The 3 months correlation between Gladstone and First is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and First Eagle Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Alternative 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 First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Alternative has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and First Eagle go up and down completely randomly.

Pair Corralation between Gladstone Investment and First Eagle

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.02 times less return on investment than First Eagle. But when comparing it to its historical volatility, Gladstone Investment is 1.89 times less risky than First Eagle. It trades about 0.21 of its potential returns per unit of risk. First Eagle Alternative is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,411  in First Eagle Alternative on September 20, 2024 and sell it today you would earn a total of  24.00  from holding First Eagle Alternative or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Gladstone Investment  vs.  First Eagle Alternative

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. 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.

First Eagle Alternative

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Alternative are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gladstone Investment and First Eagle

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

The idea behind Gladstone Investment and First Eagle Alternative 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.