Correlation Between Realty Income and Gladstone Commercial

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

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

Diversification Opportunities for Realty Income and Gladstone Commercial

-0.54

Correlation Coefficient

Realty Income  Gladstone Commercial

Excellent diversification

The 3 months correlation between Realty and Gladstone is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial and Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and Gladstone Commercial go up and down completely randomly.

Pair Corralation between Realty Income and Gladstone Commercial

Taking into account the 90-day investment horizon Realty Income is expected to generate 1.09 times more return on investment than Gladstone Commercial. However, Realty Income is 1.09 times more volatile than Gladstone Commercial. It trades about -0.31 of its potential returns per unit of risk. Gladstone Commercial is currently generating about -0.36 per unit of risk. If you would invest  5,719  in Realty Income on September 26, 2024 and sell it today you would lose (419.00) from holding Realty Income or give up 7.33% of portfolio value over 90 days.

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

Realty Income  vs.  Gladstone Commercial

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gladstone Commercial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gladstone Commercial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Realty Income and Gladstone Commercial

The main advantage of trading using opposite Realty Income and Gladstone Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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 Realty Income 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.