Correlation Between Gladstone Capital and Merchants Bancorp

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

By analyzing existing cross correlation between Gladstone Capital and Merchants Bancorp, you can compare the effects of market volatilities on Gladstone Capital and Merchants Bancorp 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 Capital with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Capital and Merchants Bancorp.

Diversification Opportunities for Gladstone Capital and Merchants Bancorp

-0.61

Correlation Coefficient

Gladstone Capital  Merchants Bancorp

Excellent diversification

The 3 months correlation between Gladstone and Merchants is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Capital and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and Gladstone Capital 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 Capital are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Gladstone Capital i.e., Gladstone Capital and Merchants Bancorp go up and down completely randomly.

Pair Corralation between Gladstone Capital and Merchants Bancorp

Given the investment horizon of 90 days Gladstone Capital is expected to generate 0.31 times more return on investment than Merchants Bancorp. However, Gladstone Capital is 3.22 times less risky than Merchants Bancorp. It trades about 0.34 of its potential returns per unit of risk. Merchants Bancorp is currently generating about -0.08 per unit of risk. If you would invest  2,335  in Gladstone Capital on October 4, 2024 and sell it today you would earn a total of  574.00  from holding Gladstone Capital or generate 24.58% return on investment over 90 days.

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

Gladstone Capital  vs.  Merchants Bancorp

Gladstone Capital

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Capital are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Gladstone Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Merchants Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merchants Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gladstone Capital and Merchants Bancorp

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

The idea behind Gladstone Capital and Merchants Bancorp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.