Correlation Between EastGroup Properties and CubeSmart
Can any of the company-specific risk be diversified away by investing in both EastGroup Properties and CubeSmart 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 EastGroup Properties and CubeSmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EastGroup Properties and CubeSmart, you can compare the effects of market volatilities on EastGroup Properties and CubeSmart 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 EastGroup Properties with a short position of CubeSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of EastGroup Properties and CubeSmart.
Diversification Opportunities for EastGroup Properties and CubeSmart
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EastGroup and CubeSmart is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding EastGroup Properties and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and EastGroup Properties 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 EastGroup Properties are associated (or correlated) with CubeSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubeSmart has no effect on the direction of EastGroup Properties i.e., EastGroup Properties and CubeSmart go up and down completely randomly.
Pair Corralation between EastGroup Properties and CubeSmart
Considering the 90-day investment horizon EastGroup Properties is expected to under-perform the CubeSmart. But the stock apears to be less risky and, when comparing its historical volatility, EastGroup Properties is 1.56 times less risky than CubeSmart. The stock trades about -0.07 of its potential returns per unit of risk. The CubeSmart is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,801 in CubeSmart on August 27, 2024 and sell it today you would earn a total of 185.00 from holding CubeSmart or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EastGroup Properties vs. CubeSmart
Performance |
| Timeline |
| EastGroup Properties |
| CubeSmart |
EastGroup Properties and CubeSmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EastGroup Properties and CubeSmart
The main advantage of trading using opposite EastGroup Properties and CubeSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EastGroup Properties position performs unexpectedly, CubeSmart 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 CubeSmart will offset losses from the drop in CubeSmart's long position.| EastGroup Properties vs. Terreno Realty | EastGroup Properties vs. Plymouth Industrial REIT | EastGroup Properties vs. LXP Industrial Trust | EastGroup Properties vs. First Industrial Realty |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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