Correlation Between Gladstone Capital and SEI Investments

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

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

Diversification Opportunities for Gladstone Capital and SEI Investments

0.73

Correlation Coefficient

Gladstone Capital  SEI Investments

Poor diversification

The 3 months correlation between Gladstone and SEI is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Capital and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Gladstone Capital i.e., Gladstone Capital and SEI Investments go up and down completely randomly.

Pair Corralation between Gladstone Capital and SEI Investments

Given the investment horizon of 90 days Gladstone Capital is expected to generate 1.02 times more return on investment than SEI Investments. However, Gladstone Capital is 1.02 times more volatile than SEI Investments. It trades about 0.0 of its potential returns per unit of risk. SEI Investments is currently generating about -0.06 per unit of risk. If you would invest  2,784  in Gladstone Capital on December 28, 2024 and sell it today you would lose (8.00) from holding Gladstone Capital or give up 0.29% of portfolio value over 90 days.

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

Gladstone Capital  vs.  SEI Investments

Gladstone Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gladstone Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gladstone Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

SEI Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SEI Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, SEI Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gladstone Capital and SEI Investments

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

The idea behind Gladstone Capital and SEI Investments 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.