Correlation Between First Industrial and Gladstone Commercial

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

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

Diversification Opportunities for First Industrial and Gladstone Commercial

0.56

Correlation Coefficient

First Industrial  Gladstone Commercial

Very weak diversification

The 3 months correlation between First and Gladstone is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty 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 First Industrial 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 First Industrial Realty 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 First Industrial i.e., First Industrial and Gladstone Commercial go up and down completely randomly.

Pair Corralation between First Industrial and Gladstone Commercial

Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.62 times more return on investment than Gladstone Commercial. However, First Industrial is 1.62 times more volatile than Gladstone Commercial Corp. It trades about 0.11 of its potential returns per unit of risk. Gladstone Commercial Corp is currently generating about 0.05 per unit of risk. If you would invest  4,971  in First Industrial Realty on December 29, 2024 and sell it today you would earn a total of  454.00  from holding First Industrial Realty or generate 9.13% return on investment over 90 days.

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

First Industrial Realty  vs.  Gladstone Commercial Corp

First Industrial Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Industrial Realty are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 First Industrial and Gladstone Commercial

The main advantage of trading using opposite First Industrial and Gladstone Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial 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 First Industrial Realty 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.