Correlation Between Gladstone Land and Tandem Diabetes

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

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

Diversification Opportunities for Gladstone Land and Tandem Diabetes

-0.65

Correlation Coefficient

Gladstone Land  Tandem Diabetes

Excellent diversification

The 3 months correlation between Gladstone and Tandem is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Land and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care 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 Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of Gladstone Land i.e., Gladstone Land and Tandem Diabetes go up and down completely randomly.

Pair Corralation between Gladstone Land and Tandem Diabetes

Given the investment horizon of 90 days Gladstone Land is expected to under-perform the Tandem Diabetes. But the stock apears to be less risky and, when comparing its historical volatility, Gladstone Land is 2.12 times less risky than Tandem Diabetes. The stock trades about -0.08 of its potential returns per unit of risk. The Tandem Diabetes Care is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  7,600  in Tandem Diabetes Care on January 26, 2024 and sell it today you would lose (4,088) from holding Tandem Diabetes Care or give up 53.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Gladstone Land  vs.  Tandem Diabetes Care

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.

Tandem Diabetes Care

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tandem Diabetes Care are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Tandem Diabetes displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gladstone Land and Tandem Diabetes

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

The idea behind Gladstone Land and Tandem Diabetes Care 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.