Correlation Between Power REIT and Gladstone Land
Can any of the company-specific risk be diversified away by investing in both Power REIT 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 Power REIT and Gladstone Land into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power REIT PFD and Gladstone Land Corp, you can compare the effects of market volatilities on Power REIT 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 Power REIT with a short position of Gladstone Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power REIT and Gladstone Land.
Diversification Opportunities for Power REIT and Gladstone Land
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Power and Gladstone is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT PFD and Gladstone Land Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Land Corp 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 PFD 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 Corp has no effect on the direction of Power REIT i.e., Power REIT and Gladstone Land go up and down completely randomly.
Pair Corralation between Power REIT and Gladstone Land
Assuming the 90 days horizon Power REIT PFD is expected to generate 21.96 times more return on investment than Gladstone Land. However, Power REIT is 21.96 times more volatile than Gladstone Land Corp. It trades about 0.05 of its potential returns per unit of risk. Gladstone Land Corp is currently generating about 0.13 per unit of risk. If you would invest 340.00 in Power REIT PFD on September 1, 2024 and sell it today you would earn a total of 10.00 from holding Power REIT PFD or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.8% |
| Values | Daily Returns |
Power REIT PFD vs. Gladstone Land Corp
Performance |
| Timeline |
| Power REIT PFD |
| Gladstone Land Corp |
Power REIT and Gladstone Land Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power REIT and Gladstone Land
The main advantage of trading using opposite Power REIT and Gladstone Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT PFD and Gladstone Land 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.| Gladstone Land vs. EPR Properties | Gladstone Land vs. Digital Realty Trust | Gladstone Land vs. EPR Properties Series | Gladstone Land vs. Digital Realty Trust |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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