Correlation Between NIPPON PROLOGIS and STAG Industrial

Can any of the company-specific risk be diversified away by investing in both NIPPON PROLOGIS and STAG Industrial 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 STAG Industrial 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 STAG Industrial, you can compare the effects of market volatilities on NIPPON PROLOGIS and STAG Industrial 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 STAG Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON PROLOGIS and STAG Industrial.

Diversification Opportunities for NIPPON PROLOGIS and STAG Industrial

0.53

Correlation Coefficient

NIPPON PROLOGIS  STAG Industrial

Very weak diversification

The 3 months correlation between NIPPON and STAG is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON PROLOGIS REIT and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG Industrial 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 STAG Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAG Industrial has no effect on the direction of NIPPON PROLOGIS i.e., NIPPON PROLOGIS and STAG Industrial go up and down completely randomly.

Pair Corralation between NIPPON PROLOGIS and STAG Industrial

Assuming the 90 days trading horizon NIPPON PROLOGIS REIT is expected to under-perform the STAG Industrial. But the stock apears to be less risky and, when comparing its historical volatility, NIPPON PROLOGIS REIT is 1.02 times less risky than STAG Industrial. The stock trades about -0.22 of its potential returns per unit of risk. The STAG Industrial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,566  in STAG Industrial on September 14, 2024 and sell it today you would lose (161.00) from holding STAG Industrial or give up 4.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NIPPON PROLOGIS REIT  vs.  STAG Industrial

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.

STAG Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STAG Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, STAG Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NIPPON PROLOGIS and STAG Industrial

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

The idea behind NIPPON PROLOGIS REIT and STAG Industrial 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.