Correlation Between Realty Income and Gladstone Land

Can any of the company-specific risk be diversified away by investing in both Realty Income and Gladstone Land 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 Land 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 Land, you can compare the effects of market volatilities on Realty Income and Gladstone Land 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 Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Gladstone Land.

Diversification Opportunities for Realty Income and Gladstone Land

-0.28

Correlation Coefficient

Realty Income  Gladstone Land

Very good diversification

The 3 months correlation between Realty and Gladstone is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and Gladstone Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Land 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 Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Land has no effect on the direction of Realty Income i.e., Realty Income and Gladstone Land go up and down completely randomly.

Pair Corralation between Realty Income and Gladstone Land

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Gladstone Land. In addition to that, Realty Income is 1.25 times more volatile than Gladstone Land. It trades about -0.16 of its total potential returns per unit of risk. Gladstone Land is currently generating about -0.06 per unit of volatility. If you would invest  2,211  in Gladstone Land on September 13, 2024 and sell it today you would lose (72.00) from holding Gladstone Land or give up 3.26% of portfolio value over 90 days.

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

Realty Income  vs.  Gladstone Land

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Gladstone Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Land has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Gladstone Land is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Realty Income and Gladstone Land

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

The idea behind Realty Income and Gladstone Land 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.