Correlation Between International Consolidated and Gladstone Investment

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

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

Diversification Opportunities for International Consolidated and Gladstone Investment

0.26

Correlation Coefficient

International Consolidated  Gladstone Investment

Modest diversification

The 3 months correlation between International and Gladstone is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of International Consolidated i.e., International Consolidated and Gladstone Investment go up and down completely randomly.

Pair Corralation between International Consolidated and Gladstone Investment

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.23 times more return on investment than Gladstone Investment. However, International Consolidated is 1.23 times more volatile than Gladstone Investment. It trades about 0.12 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.07 per unit of risk. If you would invest  177.00  in International Consolidated Airlines on October 4, 2024 and sell it today you would earn a total of  184.00  from holding International Consolidated Airlines or generate 103.95% return on investment over 90 days.

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

International Consolidated Air  vs.  Gladstone Investment

International Consolidated

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Gladstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with International Consolidated and Gladstone Investment

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

The idea behind International Consolidated Airlines and Gladstone Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.