Correlation Between STAG Industrial and CubeSmart
Can any of the company-specific risk be diversified away by investing in both STAG 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 STAG Industrial and CubeSmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STAG Industrial and CubeSmart, you can compare the effects of market volatilities on STAG 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 STAG Industrial with a short position of CubeSmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of STAG Industrial and CubeSmart.
Diversification Opportunities for STAG Industrial and CubeSmart
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STAG and CubeSmart is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding STAG Industrial and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and STAG 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 STAG Industrial 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 STAG Industrial i.e., STAG Industrial and CubeSmart go up and down completely randomly.
Pair Corralation between STAG Industrial and CubeSmart
Given the investment horizon of 90 days STAG Industrial is expected to under-perform the CubeSmart. But the stock apears to be less risky and, when comparing its historical volatility, STAG Industrial is 1.33 times less risky than CubeSmart. The stock trades about -0.16 of its potential returns per unit of risk. The CubeSmart is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 4,930 in CubeSmart on August 24, 2024 and sell it today you would lose (70.00) from holding CubeSmart or give up 1.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
STAG Industrial vs. CubeSmart
Performance |
| Timeline |
| STAG Industrial |
| CubeSmart |
STAG Industrial and CubeSmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STAG Industrial and CubeSmart
The main advantage of trading using opposite STAG Industrial and CubeSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STAG 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.| STAG Industrial vs. Public Storage | STAG Industrial vs. Extra Space Storage | STAG Industrial vs. Rexford Industrial Realty | STAG Industrial vs. Innovative Industrial Properties |
| 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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