Correlation Between Modiv and Gladstone Commercial

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

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

Diversification Opportunities for Modiv and Gladstone Commercial

0.41

Correlation Coefficient

Modiv  Gladstone Commercial

Very weak diversification

The 3 months correlation between Modiv and Gladstone is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc and Gladstone Commercial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial Corp and Modiv 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 Modiv Inc are associated (or correlated) with Gladstone Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Commercial Corp has no effect on the direction of Modiv i.e., Modiv and Gladstone Commercial go up and down completely randomly.

Pair Corralation between Modiv and Gladstone Commercial

Considering the 90-day investment horizon Modiv Inc is expected to generate 2.5 times more return on investment than Gladstone Commercial. However, Modiv is 2.5 times more volatile than Gladstone Commercial Corp. It trades about 0.07 of its potential returns per unit of risk. Gladstone Commercial Corp is currently generating about 0.05 per unit of risk. If you would invest  1,465  in Modiv Inc on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Modiv Inc or generate 7.58% return on investment over 90 days.

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

Modiv Inc  vs.  Gladstone Commercial Corp

Modiv Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Modiv Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Modiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gladstone Commercial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial Corp are ranked lower than 4 (%) 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.

Pair Trading with Modiv and Gladstone Commercial

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

The idea behind Modiv Inc and Gladstone Commercial Corp 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.