Correlation Between Gladstone Investment and Porvair Plc

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

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

Diversification Opportunities for Gladstone Investment and Porvair Plc

0.42

Correlation Coefficient

Gladstone Investment  Porvair Plc

Very weak diversification

The 3 months correlation between Gladstone and Porvair is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Porvair Plc go up and down completely randomly.

Pair Corralation between Gladstone Investment and Porvair Plc

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.45 times more return on investment than Porvair Plc. However, Gladstone Investment is 2.21 times less risky than Porvair Plc. It trades about 0.1 of its potential returns per unit of risk. Porvair plc is currently generating about -0.02 per unit of risk. If you would invest  2,412  in Gladstone Investment on October 25, 2024 and sell it today you would earn a total of  45.00  from holding Gladstone Investment or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Gladstone Investment  vs.  Porvair plc

Gladstone Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 8 (%) 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.

Porvair plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gladstone Investment and Porvair Plc

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

The idea behind Gladstone Investment and Porvair plc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.