Correlation Between ETFS Coffee and Gladstone Investment

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

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

Diversification Opportunities for ETFS Coffee and Gladstone Investment

0.36

Correlation Coefficient

ETFS Coffee  Gladstone Investment

Weak diversification

The 3 months correlation between ETFS and Gladstone is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and Gladstone Investment go up and down completely randomly.

Pair Corralation between ETFS Coffee and Gladstone Investment

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 28.81 times more return on investment than Gladstone Investment. However, ETFS Coffee is 28.81 times more volatile than Gladstone Investment. It trades about 0.05 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.05 per unit of risk. If you would invest  85.00  in ETFS Coffee ETC on October 3, 2024 and sell it today you would earn a total of  5,096  from holding ETFS Coffee ETC or generate 5995.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.8%
Values	Daily Returns

ETFS Coffee ETC  vs.  Gladstone Investment

ETFS Coffee ETC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Gladstone Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ETFS Coffee and Gladstone Investment

The main advantage of trading using opposite ETFS Coffee and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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 ETFS Coffee ETC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.