Correlation Between STAG Industrial and National Retail

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

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

Diversification Opportunities for STAG Industrial and National Retail

0.65

Correlation Coefficient

STAG Industrial  National Retail

Poor diversification

The 3 months correlation between STAG and National is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding STAG Industrial and National Retail Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Retail Prop and STAG 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 STAG Industrial are associated (or correlated) with National Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Retail Prop has no effect on the direction of STAG Industrial i.e., STAG Industrial and National Retail go up and down completely randomly.

Pair Corralation between STAG Industrial and National Retail

Given the investment horizon of 90 days STAG Industrial is expected to under-perform the National Retail. In addition to that, STAG Industrial is 1.02 times more volatile than National Retail Properties. It trades about -0.1 of its total potential returns per unit of risk. National Retail Properties is currently generating about -0.05 per unit of volatility. If you would invest  4,640  in National Retail Properties on August 30, 2024 and sell it today you would lose (200.00) from holding National Retail Properties or give up 4.31% of portfolio value over 90 days.

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

STAG Industrial  vs.  National Retail Properties

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 weak 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.

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, National Retail is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with STAG Industrial and National Retail

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

The idea behind STAG Industrial and National Retail 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..