Correlation Between Warehouses and CubeSmart

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

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

Diversification Opportunities for Warehouses and CubeSmart

0.62

Correlation Coefficient

Warehouses  CubeSmart

Poor diversification

The 3 months correlation between Warehouses and CubeSmart is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Warehouses De Pauw and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and Warehouses 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 Warehouses De Pauw are associated (or correlated) with CubeSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubeSmart has no effect on the direction of Warehouses i.e., Warehouses and CubeSmart go up and down completely randomly.

Pair Corralation between Warehouses and CubeSmart

Assuming the 90 days trading horizon Warehouses De Pauw is expected to generate 1.03 times more return on investment than CubeSmart. However, Warehouses is 1.03 times more volatile than CubeSmart. It trades about -0.31 of its potential returns per unit of risk. CubeSmart is currently generating about -0.55 per unit of risk. If you would invest  2,068  in Warehouses De Pauw on September 26, 2024 and sell it today you would lose (172.00) from holding Warehouses De Pauw or give up 8.32% of portfolio value over 90 days.

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

Warehouses De Pauw  vs.  CubeSmart

Warehouses De Pauw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warehouses De Pauw has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Warehouses and CubeSmart

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

The idea behind Warehouses De Pauw and CubeSmart 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.