Correlation Between Gladstone Commercial and Realty Income

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

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

Diversification Opportunities for Gladstone Commercial and Realty Income

-0.48

Correlation Coefficient

Gladstone Commercial  Realty Income

Very good diversification

The 3 months correlation between Gladstone and Realty is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Commercial and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of Gladstone Commercial i.e., Gladstone Commercial and Realty Income go up and down completely randomly.

Pair Corralation between Gladstone Commercial and Realty Income

Given the investment horizon of 90 days Gladstone Commercial is expected to under-perform the Realty Income. But the stock apears to be less risky and, when comparing its historical volatility, Gladstone Commercial is 1.07 times less risky than Realty Income. The stock trades about -0.09 of its potential returns per unit of risk. The Realty Income is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,197  in Realty Income on December 29, 2024 and sell it today you would earn a total of  419.00  from holding Realty Income or generate 8.06% return on investment over 90 days.

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

Gladstone Commercial  vs.  Realty Income

Gladstone Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gladstone Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Realty Income

Risk-Adjusted Performance

OK

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

Pair Trading with Gladstone Commercial and Realty Income

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

The idea behind Gladstone Commercial and Realty Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.