Correlation Between First Industrial and CubeSmart
Can any of the company-specific risk be diversified away by investing in both First Industrial 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 First Industrial and CubeSmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Industrial Realty and CubeSmart, you can compare the effects of market volatilities on First Industrial 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 First Industrial with a short position of CubeSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and CubeSmart.
Diversification Opportunities for First Industrial and CubeSmart
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and CubeSmart is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and First Industrial 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 First Industrial Realty 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 First Industrial i.e., First Industrial and CubeSmart go up and down completely randomly.
Pair Corralation between First Industrial and CubeSmart
Allowing for the 90-day total investment horizon First Industrial is expected to generate 4.32 times less return on investment than CubeSmart. But when comparing it to its historical volatility, First Industrial Realty is 1.53 times less risky than CubeSmart. It trades about 0.04 of its potential returns per unit of risk. CubeSmart is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,801 in CubeSmart on August 29, 2024 and sell it today you would earn a total of 213.00 from holding CubeSmart or generate 4.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Industrial Realty vs. CubeSmart
Performance |
| Timeline |
| First Industrial Realty |
| CubeSmart |
First Industrial and CubeSmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and CubeSmart
The main advantage of trading using opposite First Industrial and CubeSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial 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.| First Industrial vs. LXP Industrial Trust | First Industrial vs. Plymouth Industrial REIT | First Industrial vs. Global Self Storage | First Industrial vs. Terreno Realty |
| CubeSmart vs. Public Storage | CubeSmart vs. National Storage Affiliates | CubeSmart vs. Prologis | CubeSmart vs. Extra Space Storage |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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