Correlation Between EastGroup Properties and National Storage

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

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

Diversification Opportunities for EastGroup Properties and National Storage

0.85

Correlation Coefficient

EastGroup Properties  National Storage

Very poor diversification

The 3 months correlation between EastGroup and National is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EastGroup Properties 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 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 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 EastGroup Properties i.e., EastGroup Properties and National Storage go up and down completely randomly.

Pair Corralation between EastGroup Properties and National Storage

Considering the 90-day investment horizon EastGroup Properties is expected to under-perform the National Storage. But the stock apears to be less risky and, when comparing its historical volatility, EastGroup Properties is 1.3 times less risky than National Storage. The stock trades about -0.08 of its potential returns per unit of risk. The National Storage Affiliates is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,619  in National Storage Affiliates on August 30, 2024 and sell it today you would lose (81.00) from holding National Storage Affiliates or give up 1.75% of portfolio value over 90 days.

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

EastGroup Properties  vs.  National Storage Affiliates

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. Even with relatively invariable technical and fundamental indicators, EastGroup Properties is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

National Storage Aff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. 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 EastGroup Properties and National Storage

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

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.