Correlation Between Gladstone Commercial and Brightspire Capital

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

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

Diversification Opportunities for Gladstone Commercial and Brightspire Capital

0.61

Correlation Coefficient

Gladstone Commercial  Brightspire Capital

Poor diversification

The 3 months correlation between Gladstone and Brightspire is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Commercial Corp and Brightspire Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightspire Capital 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 Corp are associated (or correlated) with Brightspire Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightspire Capital has no effect on the direction of Gladstone Commercial i.e., Gladstone Commercial and Brightspire Capital go up and down completely randomly.

Pair Corralation between Gladstone Commercial and Brightspire Capital

Assuming the 90 days horizon Gladstone Commercial Corp is expected to under-perform the Brightspire Capital. But the preferred stock apears to be less risky and, when comparing its historical volatility, Gladstone Commercial Corp is 1.54 times less risky than Brightspire Capital. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Brightspire Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  616.00  in Brightspire Capital on November 28, 2024 and sell it today you would lose (1.00) from holding Brightspire Capital or give up 0.16% of portfolio value over 90 days.

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

Gladstone Commercial Corp  vs.  Brightspire Capital

Gladstone Commercial Corp

Risk-Adjusted Performance

Very Weak

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

Brightspire Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brightspire Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Brightspire Capital is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Gladstone Commercial and Brightspire Capital

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

The idea behind Gladstone Commercial Corp and Brightspire Capital 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.