Correlation Between Gladstone Land and Digital Realty

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

By analyzing existing cross correlation between Gladstone Land Corp and Digital Realty Trust, you can compare the effects of market volatilities on Gladstone Land and Digital Realty 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 Land with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Land and Digital Realty.

Diversification Opportunities for Gladstone Land and Digital Realty

-0.54

Correlation Coefficient

Gladstone Land  Digital Realty

Excellent diversification

The 3 months correlation between Gladstone and Digital is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Land Corp and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust and Gladstone Land 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 Land Corp are associated (or correlated) with Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of Gladstone Land i.e., Gladstone Land and Digital Realty go up and down completely randomly.

Pair Corralation between Gladstone Land and Digital Realty

Assuming the 90 days horizon Gladstone Land is expected to generate 1.19 times less return on investment than Digital Realty. But when comparing it to its historical volatility, Gladstone Land Corp is 1.58 times less risky than Digital Realty. It trades about 0.06 of its potential returns per unit of risk. Digital Realty Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,871  in Digital Realty Trust on September 2, 2024 and sell it today you would earn a total of  377.00  from holding Digital Realty Trust or generate 20.15% return on investment over 90 days.

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

Gladstone Land Corp  vs.  Digital Realty Trust

Gladstone Land Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Land Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Gladstone Land is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Digital Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Digital Realty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gladstone Land and Digital Realty

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

The idea behind Gladstone Land Corp and Digital Realty Trust 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.