Correlation Between Gladstone Commercial and City Office

Can any of the company-specific risk be diversified away by investing in both Gladstone Commercial and City Office 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 City Office 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 City Office REIT, you can compare the effects of market volatilities on Gladstone Commercial and City Office 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 City Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Commercial and City Office.

Diversification Opportunities for Gladstone Commercial and City Office

-0.59

Correlation Coefficient

Gladstone Commercial  City Office

Excellent diversification

The 3 months correlation between Gladstone and City is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Commercial Corp and City Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office REIT 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 City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office REIT has no effect on the direction of Gladstone Commercial i.e., Gladstone Commercial and City Office go up and down completely randomly.

Pair Corralation between Gladstone Commercial and City Office

Assuming the 90 days horizon Gladstone Commercial Corp is expected to under-perform the City Office. But the preferred stock apears to be less risky and, when comparing its historical volatility, Gladstone Commercial Corp is 2.06 times less risky than City Office. The preferred stock trades about -0.02 of its potential returns per unit of risk. The City Office REIT is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,750  in City Office REIT on September 5, 2024 and sell it today you would earn a total of  190.00  from holding City Office REIT or generate 10.86% 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 Corp  vs.  City Office REIT

Gladstone Commercial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Gladstone Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

City Office REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Office REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, City Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gladstone Commercial and City Office

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

The idea behind Gladstone Commercial Corp and City Office REIT 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 Global Correlations module to find global opportunities by holding instruments from different markets.