Correlation Between Mapletree Industrial and STAG Industrial

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

Diversification Opportunities for Mapletree Industrial and STAG Industrial

0.23

Correlation Coefficient

Mapletree Industrial  STAG Industrial

Modest diversification

The 3 months correlation between Mapletree and STAG is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mapletree Industrial Trust and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG Industrial 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 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 Mapletree Industrial i.e., Mapletree Industrial and STAG Industrial go up and down completely randomly.

Pair Corralation between Mapletree Industrial and STAG Industrial

Assuming the 90 days horizon Mapletree Industrial Trust is expected to generate 1.11 times more return on investment than STAG Industrial. However, Mapletree Industrial is 1.11 times more volatile than STAG Industrial. It trades about -0.01 of its potential returns per unit of risk. STAG Industrial is currently generating about -0.02 per unit of risk. If you would invest  161.00  in Mapletree Industrial Trust on September 5, 2024 and sell it today you would lose (3.00) from holding Mapletree Industrial Trust or give up 1.86% of portfolio value over 90 days.

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

Mapletree Industrial Trust  vs.  STAG Industrial

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 nearly stable basic indicators, Mapletree Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 Mapletree Industrial and STAG Industrial

The main advantage of trading using opposite Mapletree Industrial and STAG Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mapletree Industrial 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 Mapletree Industrial Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.