Correlation Between Gladstone Commercial and First Community

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

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

Diversification Opportunities for Gladstone Commercial and First Community

-0.67

Correlation Coefficient

Gladstone Commercial  First Community

Excellent diversification

The 3 months correlation between Gladstone and First is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Commercial and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial and Gladstone Commercial 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 Gladstone Commercial are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of Gladstone Commercial i.e., Gladstone Commercial and First Community go up and down completely randomly.

Pair Corralation between Gladstone Commercial and First Community

Given the investment horizon of 90 days Gladstone Commercial is expected to under-perform the First Community. But the stock apears to be less risky and, when comparing its historical volatility, Gladstone Commercial is 1.0 times less risky than First Community. The stock trades about -0.13 of its potential returns per unit of risk. The First Community Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,151  in First Community Financial on October 8, 2024 and sell it today you would earn a total of  53.00  from holding First Community Financial or generate 4.6% return on investment over 90 days.

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

Gladstone Commercial  vs.  First Community Financial

Gladstone Commercial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial are ranked lower than 4 (%) 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.

First Community Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Gladstone Commercial and First Community

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

The idea behind Gladstone Commercial and First Community Financial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.