Correlation Between Summit Bank and Gladstone Investment

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

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

Diversification Opportunities for Summit Bank and Gladstone Investment

0.48

Correlation Coefficient

Summit Bank  Gladstone Investment

Very weak diversification

The 3 months correlation between Summit and Gladstone is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bank Group and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Summit Bank 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 Summit Bank Group 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 Summit Bank i.e., Summit Bank and Gladstone Investment go up and down completely randomly.

Pair Corralation between Summit Bank and Gladstone Investment

Given the investment horizon of 90 days Summit Bank Group is expected to generate 6.51 times more return on investment than Gladstone Investment. However, Summit Bank is 6.51 times more volatile than Gladstone Investment. It trades about 0.08 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.09 per unit of risk. If you would invest  1,060  in Summit Bank Group on October 12, 2024 and sell it today you would earn a total of  350.00  from holding Summit Bank Group or generate 33.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.84%
Values	Daily Returns

Summit Bank Group  vs.  Gladstone Investment

Summit Bank Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bank Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward-looking signals, Summit Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gladstone Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Gladstone Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Summit Bank and Gladstone Investment

The main advantage of trading using opposite Summit Bank and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Bank 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 Summit Bank Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.