Correlation Between Alexandria Real and STAG Industrial

Can any of the company-specific risk be diversified away by investing in both Alexandria Real 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 Alexandria Real and STAG Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alexandria Real Estate and STAG Industrial, you can compare the effects of market volatilities on Alexandria Real 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 Alexandria Real with a short position of STAG Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alexandria Real and STAG Industrial.

Diversification Opportunities for Alexandria Real and STAG Industrial

0.86

Correlation Coefficient

Alexandria Real  STAG Industrial

Very poor diversification

The 3 months correlation between Alexandria and STAG is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG Industrial and Alexandria Real 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 Alexandria Real Estate 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 Alexandria Real i.e., Alexandria Real and STAG Industrial go up and down completely randomly.

Pair Corralation between Alexandria Real and STAG Industrial

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the STAG Industrial. In addition to that, Alexandria Real is 1.22 times more volatile than STAG Industrial. It trades about -0.19 of its total potential returns per unit of risk. STAG Industrial is currently generating about -0.14 per unit of volatility. If you would invest  3,975  in STAG Industrial on September 15, 2024 and sell it today you would lose (411.00) from holding STAG Industrial or give up 10.34% of portfolio value over 90 days.

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

Alexandria Real Estate  vs.  STAG Industrial

Alexandria Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alexandria Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Alexandria Real and STAG Industrial

The main advantage of trading using opposite Alexandria Real and STAG Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alexandria Real 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 Alexandria Real Estate 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.

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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 Stocks Directory module to find actively traded stocks across global markets.