Correlation Between Gladstone Investment and NORFOLK

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

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

Diversification Opportunities for Gladstone Investment and NORFOLK

-0.01

Correlation Coefficient

Gladstone Investment  NORFOLK

Good diversification

The 3 months correlation between Gladstone and NORFOLK is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and NORFOLK go up and down completely randomly.

Pair Corralation between Gladstone Investment and NORFOLK

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.66 times more return on investment than NORFOLK. However, Gladstone Investment is 1.66 times more volatile than NORFOLK SOUTHN P. It trades about 0.11 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about -0.02 per unit of risk. If you would invest  2,437  in Gladstone Investment on December 25, 2024 and sell it today you would earn a total of  57.00  from holding Gladstone Investment or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.05%
Values	Daily Returns

Gladstone Investment  vs.  NORFOLK SOUTHN P

Gladstone Investment

Risk-Adjusted Performance

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.

NORFOLK SOUTHN P

Risk-Adjusted Performance

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gladstone Investment and NORFOLK

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

The idea behind Gladstone Investment and NORFOLK SOUTHN P 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.