Correlation Between STEEL DYNAMICS and Gladstone Investment

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

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

Diversification Opportunities for STEEL DYNAMICS and Gladstone Investment

0.34

Correlation Coefficient

STEEL DYNAMICS  Gladstone Investment

Weak diversification

The 3 months correlation between STEEL and Gladstone is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding STEEL DYNAMICS and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and STEEL DYNAMICS 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 STEEL DYNAMICS 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 STEEL DYNAMICS i.e., STEEL DYNAMICS and Gladstone Investment go up and down completely randomly.

Pair Corralation between STEEL DYNAMICS and Gladstone Investment

Assuming the 90 days trading horizon STEEL DYNAMICS is expected to under-perform the Gladstone Investment. But the stock apears to be less risky and, when comparing its historical volatility, STEEL DYNAMICS is 1.06 times less risky than Gladstone Investment. The stock trades about -0.68 of its potential returns per unit of risk. The Gladstone Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,278  in Gladstone Investment on October 8, 2024 and sell it today you would earn a total of  14.00  from holding Gladstone Investment or generate 1.1% return on investment over 90 days.

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

STEEL DYNAMICS  vs.  Gladstone Investment

STEEL DYNAMICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STEEL DYNAMICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, STEEL DYNAMICS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Gladstone Investment

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 7 (%) 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 STEEL DYNAMICS and Gladstone Investment

The main advantage of trading using opposite STEEL DYNAMICS and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEL DYNAMICS 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 STEEL DYNAMICS 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.