Correlation Between Independence Realty and National Storage

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

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

Diversification Opportunities for Independence Realty and National Storage

0.75

Correlation Coefficient

Independence Realty  National Storage

Poor diversification

The 3 months correlation between Independence and National is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust 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 Independence Realty 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 Independence Realty Trust 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 Independence Realty i.e., Independence Realty and National Storage go up and down completely randomly.

Pair Corralation between Independence Realty and National Storage

Considering the 90-day investment horizon Independence Realty Trust is expected to generate 0.94 times more return on investment than National Storage. However, Independence Realty Trust is 1.06 times less risky than National Storage. It trades about 0.06 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.05 per unit of risk. If you would invest  2,020  in Independence Realty Trust on December 25, 2024 and sell it today you would earn a total of  81.00  from holding Independence Realty Trust or generate 4.01% return on investment over 90 days.

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

Independence Realty Trust  vs.  National Storage Affiliates

Independence Realty Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Realty Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

National Storage Aff

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Storage Affiliates are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Independence Realty and National Storage

The main advantage of trading using opposite Independence Realty and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Realty 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 Independence Realty Trust 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.