Correlation Between International Consolidated and Gladstone Commercial

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

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

Diversification Opportunities for International Consolidated and Gladstone Commercial

0.75

Correlation Coefficient

International Consolidated  Gladstone Commercial

Poor diversification

The 3 months correlation between International and Gladstone is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Gladstone Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Commercial has no effect on the direction of International Consolidated i.e., International Consolidated and Gladstone Commercial go up and down completely randomly.

Pair Corralation between International Consolidated and Gladstone Commercial

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.21 times more return on investment than Gladstone Commercial. However, International Consolidated is 1.21 times more volatile than Gladstone Commercial. It trades about 0.3 of its potential returns per unit of risk. Gladstone Commercial is currently generating about 0.1 per unit of risk. If you would invest  243.00  in International Consolidated Airlines on September 23, 2024 and sell it today you would earn a total of  125.00  from holding International Consolidated Airlines or generate 51.44% return on investment over 90 days.

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

International Consolidated Air  vs.  Gladstone Commercial

International Consolidated

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Gladstone Commercial

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with International Consolidated and Gladstone Commercial

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

The idea behind International Consolidated Airlines and Gladstone Commercial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.