Correlation Between CubeSmart and National Storage

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

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

Diversification Opportunities for CubeSmart and National Storage

0.7

Correlation Coefficient

CubeSmart  National Storage

Poor diversification

The 3 months correlation between CubeSmart and National is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of CubeSmart i.e., CubeSmart and National Storage go up and down completely randomly.

Pair Corralation between CubeSmart and National Storage

Given the investment horizon of 90 days CubeSmart is expected to generate 5.25 times less return on investment than National Storage. But when comparing it to its historical volatility, CubeSmart is 1.09 times less risky than National Storage. It trades about 0.01 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,678  in National Storage Affiliates on December 30, 2024 and sell it today you would earn a total of  193.00  from holding National Storage Affiliates or generate 5.25% return on investment over 90 days.

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

CubeSmart  vs.  National Storage Affiliates

CubeSmart

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CubeSmart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

National Storage Aff

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in National Storage Affiliates are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, National Storage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CubeSmart and National Storage

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

The idea behind CubeSmart and National Storage Affiliates 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.