Correlation Between Gladstone Investment and SWK Holdings

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

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

Diversification Opportunities for Gladstone Investment and SWK Holdings

0.48

Correlation Coefficient

Gladstone Investment  SWK Holdings

Very weak diversification

The 3 months correlation between Gladstone and SWK is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and SWK Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWK Holdings 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 SWK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWK Holdings has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and SWK Holdings go up and down completely randomly.

Pair Corralation between Gladstone Investment and SWK Holdings

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.84 times more return on investment than SWK Holdings. However, Gladstone Investment is 1.19 times less risky than SWK Holdings. It trades about 0.08 of its potential returns per unit of risk. SWK Holdings is currently generating about 0.04 per unit of risk. If you would invest  2,434  in Gladstone Investment on October 10, 2024 and sell it today you would earn a total of  38.00  from holding Gladstone Investment or generate 1.56% return on investment over 90 days.

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

Gladstone Investment  vs.  SWK Holdings

Gladstone Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 6 (%) 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.

SWK Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWK Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, SWK Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gladstone Investment and SWK Holdings

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

The idea behind Gladstone Investment and SWK Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..