Correlation Between CubeSmart and Terreno Realty

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

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

Diversification Opportunities for CubeSmart and Terreno Realty

-0.29

Correlation Coefficient

CubeSmart  Terreno Realty

Very good diversification

The 3 months correlation between CubeSmart and Terreno is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of CubeSmart i.e., CubeSmart and Terreno Realty go up and down completely randomly.

Pair Corralation between CubeSmart and Terreno Realty

Given the investment horizon of 90 days CubeSmart is expected to under-perform the Terreno Realty. But the stock apears to be less risky and, when comparing its historical volatility, CubeSmart is 1.03 times less risky than Terreno Realty. The stock trades about 0.0 of its potential returns per unit of risk. The Terreno Realty is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,197  in Terreno Realty on December 2, 2024 and sell it today you would earn a total of  585.00  from holding Terreno Realty or generate 9.44% return on investment over 90 days.

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

CubeSmart  vs.  Terreno Realty

CubeSmart

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Terreno Realty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terreno Realty are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Terreno Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CubeSmart and Terreno Realty

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

The idea behind CubeSmart and Terreno Realty 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.