Correlation Between Gladstone Investment and Atmos Energy

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

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

Diversification Opportunities for Gladstone Investment and Atmos Energy

0.71

Correlation Coefficient

Gladstone Investment  Atmos Energy

Poor diversification

The 3 months correlation between Gladstone and Atmos is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and Gladstone Investment 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 Gladstone Investment are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Atmos Energy go up and down completely randomly.

Pair Corralation between Gladstone Investment and Atmos Energy

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.2 times more return on investment than Atmos Energy. However, Gladstone Investment is 1.2 times more volatile than Atmos Energy. It trades about -0.06 of its potential returns per unit of risk. Atmos Energy is currently generating about -0.32 per unit of risk. If you would invest  1,262  in Gladstone Investment on September 24, 2024 and sell it today you would lose (19.00) from holding Gladstone Investment or give up 1.51% of portfolio value over 90 days.

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

Gladstone Investment  vs.  Atmos Energy

Gladstone Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 5 (%) 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 January 2025.

Atmos Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gladstone Investment and Atmos Energy

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

The idea behind Gladstone Investment and Atmos Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.