Correlation Between Invesco Advantage and Gladstone Investment

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

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

Diversification Opportunities for Invesco Advantage and Gladstone Investment

-0.35

Correlation Coefficient

Invesco Advantage  Gladstone Investment

Very good diversification

The 3 months correlation between Invesco and Gladstone is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Advantage MIT and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Invesco Advantage 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 Invesco Advantage MIT 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 Invesco Advantage i.e., Invesco Advantage and Gladstone Investment go up and down completely randomly.

Pair Corralation between Invesco Advantage and Gladstone Investment

Considering the 90-day investment horizon Invesco Advantage MIT is expected to under-perform the Gladstone Investment. But the stock apears to be less risky and, when comparing its historical volatility, Invesco Advantage MIT is 2.36 times less risky than Gladstone Investment. The stock trades about -0.01 of its potential returns per unit of risk. The Gladstone Investment is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Gladstone Investment on September 12, 2024 and sell it today you would earn a total of  192.00  from holding Gladstone Investment or generate 16.15% return on investment over 90 days.

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

Invesco Advantage MIT  vs.  Gladstone Investment

Invesco Advantage MIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Advantage MIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Invesco Advantage is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Gladstone Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Gladstone Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco Advantage and Gladstone Investment

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

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.