Correlation Between Hovnanian Enterprises and Gladstone Commercial

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

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

Diversification Opportunities for Hovnanian Enterprises and Gladstone Commercial

-0.11

Correlation Coefficient

Hovnanian Enterprises  Gladstone Commercial

Good diversification

The 3 months correlation between Hovnanian and Gladstone is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hovnanian Enterprises PFD and Gladstone Commercial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial Corp and Hovnanian Enterprises 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 Hovnanian Enterprises PFD 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 Corp has no effect on the direction of Hovnanian Enterprises i.e., Hovnanian Enterprises and Gladstone Commercial go up and down completely randomly.

Pair Corralation between Hovnanian Enterprises and Gladstone Commercial

Assuming the 90 days horizon Hovnanian Enterprises PFD is expected to generate 0.52 times more return on investment than Gladstone Commercial. However, Hovnanian Enterprises PFD is 1.93 times less risky than Gladstone Commercial. It trades about 0.12 of its potential returns per unit of risk. Gladstone Commercial Corp is currently generating about -0.03 per unit of risk. If you would invest  1,802  in Hovnanian Enterprises PFD on March 31, 2024 and sell it today you would earn a total of  26.00  from holding Hovnanian Enterprises PFD or generate 1.44% return on investment over 90 days.

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

Hovnanian Enterprises PFD  vs.  Gladstone Commercial Corp

Hovnanian Enterprises PFD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hovnanian Enterprises PFD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hovnanian Enterprises is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Gladstone Commercial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Commercial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Gladstone Commercial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hovnanian Enterprises and Gladstone Commercial

The main advantage of trading using opposite Hovnanian Enterprises and Gladstone Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hovnanian Enterprises 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 Hovnanian Enterprises PFD and Gladstone Commercial 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.