Correlation Between NIPPON PROLOGIS and SEGRO Plc

Can any of the company-specific risk be diversified away by investing in both NIPPON PROLOGIS and SEGRO Plc 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 NIPPON PROLOGIS and SEGRO Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIPPON PROLOGIS REIT and SEGRO Plc, you can compare the effects of market volatilities on NIPPON PROLOGIS and SEGRO Plc 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 NIPPON PROLOGIS with a short position of SEGRO Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON PROLOGIS and SEGRO Plc.

Diversification Opportunities for NIPPON PROLOGIS and SEGRO Plc

0.68

Correlation Coefficient

NIPPON PROLOGIS  SEGRO Plc

Poor diversification

The 3 months correlation between NIPPON and SEGRO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON PROLOGIS REIT and SEGRO Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEGRO Plc and NIPPON PROLOGIS 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 NIPPON PROLOGIS REIT are associated (or correlated) with SEGRO Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEGRO Plc has no effect on the direction of NIPPON PROLOGIS i.e., NIPPON PROLOGIS and SEGRO Plc go up and down completely randomly.

Pair Corralation between NIPPON PROLOGIS and SEGRO Plc

Assuming the 90 days trading horizon NIPPON PROLOGIS REIT is expected to generate 0.71 times more return on investment than SEGRO Plc. However, NIPPON PROLOGIS REIT is 1.41 times less risky than SEGRO Plc. It trades about -0.22 of its potential returns per unit of risk. SEGRO Plc is currently generating about -0.16 per unit of risk. If you would invest  162,000  in NIPPON PROLOGIS REIT on September 12, 2024 and sell it today you would lose (27,000) from holding NIPPON PROLOGIS REIT or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

NIPPON PROLOGIS REIT  vs.  SEGRO Plc

NIPPON PROLOGIS REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON PROLOGIS REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SEGRO Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEGRO Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NIPPON PROLOGIS and SEGRO Plc

The main advantage of trading using opposite NIPPON PROLOGIS and SEGRO Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON PROLOGIS position performs unexpectedly, SEGRO Plc 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 SEGRO Plc will offset losses from the drop in SEGRO Plc's long position.

The idea behind NIPPON PROLOGIS REIT and SEGRO Plc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.