Correlation Between Gladstone Land and RCI Hospitality

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

By analyzing existing cross correlation between Gladstone Land and RCI Hospitality Holdings, you can compare the effects of market volatilities on Gladstone Land and RCI Hospitality 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 RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Land and RCI Hospitality.

Diversification Opportunities for Gladstone Land and RCI Hospitality

0.89

Correlation Coefficient

Gladstone Land  RCI Hospitality

Very poor diversification

The 3 months correlation between Gladstone and RCI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Land and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings 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 are associated (or correlated) with RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Gladstone Land i.e., Gladstone Land and RCI Hospitality go up and down completely randomly.

Pair Corralation between Gladstone Land and RCI Hospitality

Given the investment horizon of 90 days Gladstone Land is expected to under-perform the RCI Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Gladstone Land is 1.14 times less risky than RCI Hospitality. The stock trades about -0.08 of its potential returns per unit of risk. The RCI Hospitality Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,201  in RCI Hospitality Holdings on January 25, 2024 and sell it today you would lose (1,105) from holding RCI Hospitality Holdings or give up 17.82% of portfolio value over 90 days.

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

Gladstone Land  vs.  RCI Hospitality Holdings

Gladstone Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

RCI Hospitality Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RCI Hospitality Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Gladstone Land and RCI Hospitality

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

The idea behind Gladstone Land and RCI Hospitality Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.