Correlation Between CubeSmart and Innovative Industrial

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

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

Diversification Opportunities for CubeSmart and Innovative Industrial

0.53

Correlation Coefficient

CubeSmart  Innovative Industrial

Very weak diversification

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

Pair Corralation between CubeSmart and Innovative Industrial

Given the investment horizon of 90 days CubeSmart is expected to generate 0.58 times more return on investment than Innovative Industrial. However, CubeSmart is 1.74 times less risky than Innovative Industrial. It trades about -0.16 of its potential returns per unit of risk. Innovative Industrial Properties is currently generating about -0.12 per unit of risk. If you would invest  5,341  in CubeSmart on September 12, 2024 and sell it today you would lose (677.00) from holding CubeSmart or give up 12.68% of portfolio value over 90 days.

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

CubeSmart  vs.  Innovative Industrial Properti

CubeSmart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CubeSmart 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 fundamental drivers 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.

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with CubeSmart and Innovative Industrial

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

The idea behind CubeSmart and Innovative Industrial Properties 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.