Correlation Between ITALIAN WINE and Gladstone Investment

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

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

Diversification Opportunities for ITALIAN WINE and Gladstone Investment

0.35

Correlation Coefficient

ITALIAN WINE  Gladstone Investment

Weak diversification

The 3 months correlation between ITALIAN and Gladstone is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and Gladstone Investment go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Gladstone Investment

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the Gladstone Investment. In addition to that, ITALIAN WINE is 1.9 times more volatile than Gladstone Investment. It trades about -0.05 of its total potential returns per unit of risk. Gladstone Investment is currently generating about -0.01 per unit of volatility. If you would invest  1,267  in Gladstone Investment on December 23, 2024 and sell it today you would lose (19.00) from holding Gladstone Investment or give up 1.5% of portfolio value over 90 days.

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

ITALIAN WINE BRANDS  vs.  Gladstone Investment

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Gladstone Investment

Risk-Adjusted Performance

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 ITALIAN WINE and Gladstone Investment

The main advantage of trading using opposite ITALIAN WINE and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.