Correlation Between EPR Properties and Gladstone Land

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

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

Diversification Opportunities for EPR Properties and Gladstone Land

0.8

Correlation Coefficient

EPR Properties  Gladstone Land

Very poor diversification

The 3 months correlation between EPR and Gladstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding EPR Properties and Gladstone Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Land and EPR Properties 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 EPR Properties 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 EPR Properties i.e., EPR Properties and Gladstone Land go up and down completely randomly.

Pair Corralation between EPR Properties and Gladstone Land

Assuming the 90 days trading horizon EPR Properties is expected to generate 0.76 times more return on investment than Gladstone Land. However, EPR Properties is 1.32 times less risky than Gladstone Land. It trades about 0.05 of its potential returns per unit of risk. Gladstone Land is currently generating about -0.06 per unit of risk. If you would invest  1,579  in EPR Properties on September 29, 2024 and sell it today you would earn a total of  473.00  from holding EPR Properties or generate 29.96% return on investment over 90 days.

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

EPR Properties  vs.  Gladstone Land

EPR Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Preferred Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with EPR Properties and Gladstone Land

The main advantage of trading using opposite EPR Properties and Gladstone Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EPR Properties 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 EPR Properties 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.