Correlation Between EastGroup Properties and Prologis

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

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

Diversification Opportunities for EastGroup Properties and Prologis

0.82

Correlation Coefficient

EastGroup Properties  Prologis

Very poor diversification

The 3 months correlation between EastGroup and Prologis is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding EastGroup Properties and Prologis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prologis and EastGroup Properties 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 EastGroup Properties 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 EastGroup Properties i.e., EastGroup Properties and Prologis go up and down completely randomly.

Pair Corralation between EastGroup Properties and Prologis

Assuming the 90 days horizon EastGroup Properties is expected to under-perform the Prologis. But the stock apears to be less risky and, when comparing its historical volatility, EastGroup Properties is 1.19 times less risky than Prologis. The stock trades about -0.04 of its potential returns per unit of risk. The Prologis is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10,600  in Prologis on September 13, 2024 and sell it today you would earn a total of  10.00  from holding Prologis or generate 0.09% return on investment over 90 days.

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

EastGroup Properties  vs.  Prologis

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EastGroup Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EastGroup Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Prologis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prologis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with EastGroup Properties and Prologis

The main advantage of trading using opposite EastGroup Properties and Prologis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EastGroup Properties 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 EastGroup Properties 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.