Correlation Between CubeSmart and First Industrial

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

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

Diversification Opportunities for CubeSmart and First Industrial

0.61

Correlation Coefficient

CubeSmart  First Industrial

Poor diversification

The 3 months correlation between CubeSmart and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial Realty and CubeSmart 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 CubeSmart are associated (or correlated) with First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of CubeSmart i.e., CubeSmart and First Industrial go up and down completely randomly.

Pair Corralation between CubeSmart and First Industrial

Assuming the 90 days horizon CubeSmart is expected to generate 1.1 times more return on investment than First Industrial. However, CubeSmart is 1.1 times more volatile than First Industrial Realty. It trades about 0.01 of its potential returns per unit of risk. First Industrial Realty is currently generating about 0.01 per unit of risk. If you would invest  4,023  in CubeSmart on September 26, 2024 and sell it today you would earn a total of  75.00  from holding CubeSmart or generate 1.86% return on investment over 90 days.

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

CubeSmart  vs.  First Industrial Realty

CubeSmart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CubeSmart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

First Industrial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Industrial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First 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 CubeSmart and First Industrial

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

The idea behind CubeSmart and First Industrial Realty 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.