Correlation Between CubeSmart and Prologis

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

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

Diversification Opportunities for CubeSmart and Prologis

0.32

Correlation Coefficient

CubeSmart  Prologis

Weak diversification

The 3 months correlation between CubeSmart and Prologis is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and Prologis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prologis 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 Prologis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prologis has no effect on the direction of CubeSmart i.e., CubeSmart and Prologis go up and down completely randomly.

Pair Corralation between CubeSmart and Prologis

Given the investment horizon of 90 days CubeSmart is expected to generate 6.17 times less return on investment than Prologis. But when comparing it to its historical volatility, CubeSmart is 1.3 times less risky than Prologis. It trades about 0.01 of its potential returns per unit of risk. Prologis is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,417  in Prologis on December 30, 2024 and sell it today you would earn a total of  628.00  from holding Prologis or generate 6.03% return on investment over 90 days.

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

CubeSmart  vs.  Prologis

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.

Prologis

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prologis are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Prologis may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CubeSmart and Prologis

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

The idea behind CubeSmart and Prologis 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.