Correlation Between Power REIT and Gladstone Commercial

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

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

Diversification Opportunities for Power REIT and Gladstone Commercial

0.24

Correlation Coefficient

Power REIT  Gladstone Commercial

Modest diversification

The 3 months correlation between Power and Gladstone is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial and Power REIT 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 Power REIT 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 has no effect on the direction of Power REIT i.e., Power REIT and Gladstone Commercial go up and down completely randomly.

Pair Corralation between Power REIT and Gladstone Commercial

Allowing for the 90-day total investment horizon Power REIT is expected to generate 12.42 times more return on investment than Gladstone Commercial. However, Power REIT is 12.42 times more volatile than Gladstone Commercial. It trades about 0.01 of its potential returns per unit of risk. Gladstone Commercial is currently generating about -0.29 per unit of risk. If you would invest  152.00  in Power REIT on October 3, 2024 and sell it today you would lose (19.00) from holding Power REIT or give up 12.5% of portfolio value over 90 days.

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

Power REIT  vs.  Gladstone Commercial

Power REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Power REIT is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gladstone Commercial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gladstone Commercial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Power REIT and Gladstone Commercial

The main advantage of trading using opposite Power REIT and Gladstone Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT and Gladstone Commercial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.