Correlation Between Prologis and Plymouth Industrial

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

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

Diversification Opportunities for Prologis and Plymouth Industrial

0.29

Correlation Coefficient

Prologis  Plymouth Industrial

Modest diversification

The 3 months correlation between Prologis and Plymouth is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Prologis and Plymouth Industrial REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plymouth Industrial REIT and Prologis 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 Prologis are associated (or correlated) with Plymouth Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plymouth Industrial REIT has no effect on the direction of Prologis i.e., Prologis and Plymouth Industrial go up and down completely randomly.

Pair Corralation between Prologis and Plymouth Industrial

Assuming the 90 days horizon Prologis is expected to generate 1.33 times more return on investment than Plymouth Industrial. However, Prologis is 1.33 times more volatile than Plymouth Industrial REIT. It trades about -0.02 of its potential returns per unit of risk. Plymouth Industrial REIT is currently generating about -0.2 per unit of risk. If you would invest  6,106  in Prologis on September 4, 2024 and sell it today you would lose (206.00) from holding Prologis or give up 3.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Prologis  vs.  Plymouth Industrial REIT

Prologis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prologis has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Prologis is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Plymouth Industrial REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plymouth Industrial REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Prologis and Plymouth Industrial

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

The idea behind Prologis and Plymouth Industrial REIT 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.