Correlation Between Gladstone Investment and Cogent Communications

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

By analyzing existing cross correlation between Gladstone Investment and Cogent Communications Holdings, you can compare the effects of market volatilities on Gladstone Investment and Cogent Communications 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 Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and Cogent Communications.

Diversification Opportunities for Gladstone Investment and Cogent Communications

0.74

Correlation Coefficient

Gladstone Investment  Cogent Communications

Poor diversification

The 3 months correlation between Gladstone and Cogent is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Communications 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 Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of Gladstone Investment i.e., Gladstone Investment and Cogent Communications go up and down completely randomly.

Pair Corralation between Gladstone Investment and Cogent Communications

Assuming the 90 days horizon Gladstone Investment is expected to generate 1.33 times less return on investment than Cogent Communications. In addition to that, Gladstone Investment is 1.06 times more volatile than Cogent Communications Holdings. It trades about 0.07 of its total potential returns per unit of risk. Cogent Communications Holdings is currently generating about 0.1 per unit of volatility. If you would invest  6,517  in Cogent Communications Holdings on September 24, 2024 and sell it today you would earn a total of  783.00  from holding Cogent Communications Holdings or generate 12.01% return on investment over 90 days.

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

Gladstone Investment  vs.  Cogent Communications Holdings

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 uncertain basic indicators, Gladstone Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cogent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Communications Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Cogent Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gladstone Investment and Cogent Communications

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

The idea behind Gladstone Investment and Cogent Communications Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.