Correlation Between CubeSmart and STAG Industrial

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

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

Diversification Opportunities for CubeSmart and STAG Industrial

0.76

Correlation Coefficient

CubeSmart  STAG Industrial

Poor diversification

The 3 months correlation between CubeSmart and STAG is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG 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 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 CubeSmart i.e., CubeSmart and STAG Industrial go up and down completely randomly.

Pair Corralation between CubeSmart and STAG Industrial

Given the investment horizon of 90 days CubeSmart is expected to generate 1.1 times more return on investment than STAG Industrial. However, CubeSmart is 1.1 times more volatile than STAG Industrial. It trades about -0.03 of its potential returns per unit of risk. STAG Industrial is currently generating about -0.1 per unit of risk. If you would invest  5,108  in CubeSmart on September 2, 2024 and sell it today you would lose (152.00) from holding CubeSmart or give up 2.98% of portfolio value over 90 days.

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

CubeSmart  vs.  STAG Industrial

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 rather sound fundamental drivers, CubeSmart is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the 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 inconsistent 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 CubeSmart and STAG Industrial

The main advantage of trading using opposite CubeSmart and STAG Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CubeSmart 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 CubeSmart 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.