Correlation Between CubeSmart and Public Storage

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

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

Diversification Opportunities for CubeSmart and Public Storage

0.77

Correlation Coefficient

CubeSmart  Public Storage

Poor diversification

The 3 months correlation between CubeSmart and Public is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of CubeSmart i.e., CubeSmart and Public Storage go up and down completely randomly.

Pair Corralation between CubeSmart and Public Storage

Given the investment horizon of 90 days CubeSmart is expected to generate 1.09 times more return on investment than Public Storage. However, CubeSmart is 1.09 times more volatile than Public Storage. It trades about 0.01 of its potential returns per unit of risk. Public Storage is currently generating about 0.01 per unit of risk. If you would invest  4,183  in CubeSmart on December 30, 2024 and sell it today you would earn a total of  23.00  from holding CubeSmart or generate 0.55% return on investment over 90 days.

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

CubeSmart  vs.  Public Storage

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.

Public Storage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Public Storage are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Public Storage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CubeSmart and Public Storage

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

The idea behind CubeSmart and Public 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.