Correlation Between CubeSmart and GLADSTONE LAND

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

By analyzing existing cross correlation between CubeSmart and GLADSTONE LAND L 001, you can compare the effects of market volatilities on CubeSmart and GLADSTONE LAND 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 CubeSmart with a short position of GLADSTONE LAND. Check out your portfolio center. Please also check ongoing floating volatility patterns of CubeSmart and GLADSTONE LAND.

Diversification Opportunities for CubeSmart and GLADSTONE LAND

0.29

Correlation Coefficient

CubeSmart  GLADSTONE LAND

Modest diversification

The 3 months correlation between CubeSmart and GLADSTONE is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and GLADSTONE LAND L 001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLADSTONE LAND L and CubeSmart 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 CubeSmart are associated (or correlated) with GLADSTONE LAND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLADSTONE LAND L has no effect on the direction of CubeSmart i.e., CubeSmart and GLADSTONE LAND go up and down completely randomly.

Pair Corralation between CubeSmart and GLADSTONE LAND

Assuming the 90 days horizon CubeSmart is expected to under-perform the GLADSTONE LAND. But the stock apears to be less risky and, when comparing its historical volatility, CubeSmart is 1.55 times less risky than GLADSTONE LAND. The stock trades about -0.07 of its potential returns per unit of risk. The GLADSTONE LAND L 001 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,017  in GLADSTONE LAND L 001 on December 24, 2024 and sell it today you would lose (49.00) from holding GLADSTONE LAND L 001 or give up 4.82% of portfolio value over 90 days.

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

CubeSmart  vs.  GLADSTONE LAND L 001

CubeSmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days CubeSmart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CubeSmart is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

GLADSTONE LAND L

Risk-Adjusted Performance

Very Weak

Over the last 90 days GLADSTONE LAND L 001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GLADSTONE LAND is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CubeSmart and GLADSTONE LAND

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

The idea behind CubeSmart and GLADSTONE LAND L 001 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.