Correlation Between Newtek Business and Gladstone Investment

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

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

Diversification Opportunities for Newtek Business and Gladstone Investment

0.49

Correlation Coefficient

Newtek Business  Gladstone Investment

Very weak diversification

The 3 months correlation between Newtek and Gladstone is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Newtek Business Services and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Newtek Business 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 Newtek Business Services 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 Newtek Business i.e., Newtek Business and Gladstone Investment go up and down completely randomly.

Pair Corralation between Newtek Business and Gladstone Investment

Assuming the 90 days horizon Newtek Business Services is expected to generate 0.6 times more return on investment than Gladstone Investment. However, Newtek Business Services is 1.67 times less risky than Gladstone Investment. It trades about 0.23 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.08 per unit of risk. If you would invest  2,406  in Newtek Business Services on September 2, 2024 and sell it today you would earn a total of  92.00  from holding Newtek Business Services or generate 3.82% return on investment over 90 days.

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

Newtek Business Services  vs.  Gladstone Investment

Newtek Business Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Newtek Business is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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. 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 Newtek Business and Gladstone Investment

The main advantage of trading using opposite Newtek Business and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newtek Business 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 Newtek Business Services 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.