Correlation Between Gladstone Investment and Caravelle International

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

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

Diversification Opportunities for Gladstone Investment and Caravelle International

0.8

Correlation Coefficient

Gladstone Investment  Caravelle International

Very poor diversification

The 3 months correlation between Gladstone and Caravelle is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International 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 Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Caravelle International go up and down completely randomly.

Pair Corralation between Gladstone Investment and Caravelle International

Assuming the 90 days horizon Gladstone Investment is expected to generate 145.49 times less return on investment than Caravelle International. But when comparing it to its historical volatility, Gladstone Investment is 35.42 times less risky than Caravelle International. It trades about 0.06 of its potential returns per unit of risk. Caravelle International Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Caravelle International Group on October 24, 2024 and sell it today you would earn a total of  271.00  from holding Caravelle International Group or generate 255.66% return on investment over 90 days.

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

Gladstone Investment  vs.  Caravelle International Group

Gladstone Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 4 (%) 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.

Caravelle International

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caravelle International Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Caravelle International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gladstone Investment and Caravelle International

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

The idea behind Gladstone Investment and Caravelle International Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.