Correlation Between Public Storage and Innovative Industrial

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

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

Diversification Opportunities for Public Storage and Innovative Industrial

-0.38

Correlation Coefficient

Public Storage  Innovative Industrial

Very good diversification

The 3 months correlation between Public and Innovative is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage and Innovative Industrial Properti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Industrial and Public Storage 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 Public Storage 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 Public Storage i.e., Public Storage and Innovative Industrial go up and down completely randomly.

Pair Corralation between Public Storage and Innovative Industrial

Assuming the 90 days trading horizon Public Storage is expected to under-perform the Innovative Industrial. In addition to that, Public Storage is 1.39 times more volatile than Innovative Industrial Properties. It trades about -0.16 of its total potential returns per unit of risk. Innovative Industrial Properties is currently generating about 0.23 per unit of volatility. If you would invest  2,514  in Innovative Industrial Properties on September 7, 2024 and sell it today you would earn a total of  129.00  from holding Innovative Industrial Properties or generate 5.13% return on investment over 90 days.

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

Public Storage  vs.  Innovative Industrial Properti

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Innovative Industrial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Industrial Properties are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Innovative Industrial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Public Storage and Innovative Industrial

The main advantage of trading using opposite Public Storage and Innovative Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Storage 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 Public Storage 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.