Correlation Between SmartStop Self and Innovative Industrial

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

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

Diversification Opportunities for SmartStop Self and Innovative Industrial

0.36

Correlation Coefficient

SmartStop Self  Innovative Industrial

Weak diversification

The 3 months correlation between SmartStop and Innovative is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SmartStop Self 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 SmartStop Self 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 SmartStop Self 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 SmartStop Self i.e., SmartStop Self and Innovative Industrial go up and down completely randomly.

Pair Corralation between SmartStop Self and Innovative Industrial

Assuming the 90 days horizon SmartStop Self Storage is expected to generate 3.3 times more return on investment than Innovative Industrial. However, SmartStop Self is 3.3 times more volatile than Innovative Industrial Properties. It trades about 0.0 of its potential returns per unit of risk. Innovative Industrial Properties is currently generating about -0.02 per unit of risk. If you would invest  1,218  in SmartStop Self Storage on September 25, 2024 and sell it today you would lose (318.00) from holding SmartStop Self Storage or give up 26.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.74%
Values	Daily Returns

SmartStop Self Storage  vs.  Innovative Industrial Properti

SmartStop Self Storage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Innovative Industrial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SmartStop Self and Innovative Industrial

The main advantage of trading using opposite SmartStop Self and Innovative Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartStop Self 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 SmartStop Self 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.