Correlation Between CubeSmart and Life Storage

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

By analyzing existing cross correlation between CubeSmart and Life Storage, you can compare the effects of market volatilities on CubeSmart and Life Storage 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 Life Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of CubeSmart and Life Storage.

Diversification Opportunities for CubeSmart and Life Storage

0.31

Correlation Coefficient

CubeSmart  Life Storage

Weak diversification

The 3 months correlation between CubeSmart and Life is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and Life Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Storage 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 Life Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Storage has no effect on the direction of CubeSmart i.e., CubeSmart and Life Storage go up and down completely randomly.

Pair Corralation between CubeSmart and Life Storage

If you would invest  13,310  in Life Storage on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Life Storage or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

CubeSmart  vs.  Life Storage

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. In spite of rather sound fundamental drivers, CubeSmart is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Life Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Life Storage is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CubeSmart and Life Storage

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

The idea behind CubeSmart and Life Storage 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.