Correlation Between Mapletree Industrial and EastGroup Properties

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

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

Diversification Opportunities for Mapletree Industrial and EastGroup Properties

0.53

Correlation Coefficient

Mapletree Industrial  EastGroup Properties

Very weak diversification

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

Pair Corralation between Mapletree Industrial and EastGroup Properties

Assuming the 90 days horizon Mapletree Industrial Trust is expected to under-perform the EastGroup Properties. But the stock apears to be less risky and, when comparing its historical volatility, Mapletree Industrial Trust is 1.17 times less risky than EastGroup Properties. The stock trades about -0.12 of its potential returns per unit of risk. The EastGroup Properties is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  16,759  in EastGroup Properties on September 13, 2024 and sell it today you would lose (559.00) from holding EastGroup Properties or give up 3.34% of portfolio value over 90 days.

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

Mapletree Industrial Trust  vs.  EastGroup Properties

Mapletree Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mapletree Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mapletree Industrial and EastGroup Properties

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

The idea behind Mapletree Industrial Trust and EastGroup 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.