Correlation Between AGNC Investment and Gladstone Commercial

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

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

Diversification Opportunities for AGNC Investment and Gladstone Commercial

0.74

Correlation Coefficient

AGNC Investment  Gladstone Commercial

Poor diversification

The 3 months correlation between AGNC and Gladstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and Gladstone Commercial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial Corp and AGNC Investment 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 AGNC Investment Corp 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 Corp has no effect on the direction of AGNC Investment i.e., AGNC Investment and Gladstone Commercial go up and down completely randomly.

Pair Corralation between AGNC Investment and Gladstone Commercial

Assuming the 90 days horizon AGNC Investment is expected to generate 1.02 times less return on investment than Gladstone Commercial. But when comparing it to its historical volatility, AGNC Investment Corp is 2.37 times less risky than Gladstone Commercial. It trades about 0.12 of its potential returns per unit of risk. Gladstone Commercial Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,219  in Gladstone Commercial Corp on December 30, 2024 and sell it today you would earn a total of  55.00  from holding Gladstone Commercial Corp or generate 2.48% return on investment over 90 days.

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

AGNC Investment Corp  vs.  Gladstone Commercial Corp

AGNC Investment Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGNC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Gladstone Commercial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Gladstone Commercial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AGNC Investment and Gladstone Commercial

The main advantage of trading using opposite AGNC Investment and Gladstone Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment 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 AGNC Investment Corp and Gladstone Commercial Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.