Correlation Between Formula Systems and Gladstone Commercial

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

By analyzing existing cross correlation between Formula Systems 1985 and Gladstone Commercial, you can compare the effects of market volatilities on Formula Systems 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 Formula Systems with a short position of Gladstone Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Gladstone Commercial.

Diversification Opportunities for Formula Systems and Gladstone Commercial

-0.08

Correlation Coefficient

Formula Systems  Gladstone Commercial

Good diversification

The 3 months correlation between Formula and Gladstone is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Gladstone Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Commercial and Formula Systems 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 Formula Systems 1985 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 has no effect on the direction of Formula Systems i.e., Formula Systems and Gladstone Commercial go up and down completely randomly.

Pair Corralation between Formula Systems and Gladstone Commercial

Assuming the 90 days horizon Formula Systems 1985 is expected to generate 3.26 times more return on investment than Gladstone Commercial. However, Formula Systems is 3.26 times more volatile than Gladstone Commercial. It trades about 0.14 of its potential returns per unit of risk. Gladstone Commercial is currently generating about -0.05 per unit of risk. If you would invest  8,948  in Formula Systems 1985 on May 6, 2025 and sell it today you would earn a total of  2,742  from holding Formula Systems 1985 or generate 30.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.55%
Values	Daily Returns

Formula Systems 1985  vs.  Gladstone Commercial

Formula Systems 1985

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Gladstone Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gladstone Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gladstone Commercial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Formula Systems and Gladstone Commercial

The main advantage of trading using opposite Formula Systems and Gladstone Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems 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 Formula Systems 1985 and Gladstone Commercial 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.