Correlation Between Gladstone Commercial and Healthcare Trust

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

Diversification Opportunities for Gladstone Commercial and Healthcare Trust

0.78

Correlation Coefficient

Gladstone Commercial  Healthcare Trust

Poor diversification

The 3 months correlation between Gladstone and Healthcare is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Commercial Corp and Healthcare Trust PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Trust 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 Healthcare Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Trust has no effect on the direction of Gladstone Commercial i.e., Gladstone Commercial and Healthcare Trust go up and down completely randomly.

Pair Corralation between Gladstone Commercial and Healthcare Trust

Assuming the 90 days horizon Gladstone Commercial Corp is expected to generate 0.8 times more return on investment than Healthcare Trust. However, Gladstone Commercial Corp is 1.25 times less risky than Healthcare Trust. It trades about 0.05 of its potential returns per unit of risk. Healthcare Trust PR is currently generating about 0.02 per unit of risk. If you would invest  2,026  in Gladstone Commercial Corp on October 8, 2024 and sell it today you would earn a total of  245.00  from holding Gladstone Commercial Corp or generate 12.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Gladstone Commercial Corp  vs.  Healthcare Trust PR

Gladstone Commercial Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial Corp are ranked lower than 1 (%) 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.

Healthcare Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthcare Trust PR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Gladstone Commercial and Healthcare Trust

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

The idea behind Gladstone Commercial Corp and Healthcare Trust PR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.