Correlation Between LXP Industrial and National Storage

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

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

Diversification Opportunities for LXP Industrial and National Storage

0.92

Correlation Coefficient

LXP Industrial  National Storage

Almost no diversification

The 3 months correlation between LXP and National is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding LXP Industrial 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 LXP Industrial 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 LXP Industrial 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 LXP Industrial i.e., LXP Industrial and National Storage go up and down completely randomly.

Pair Corralation between LXP Industrial and National Storage

Considering the 90-day investment horizon LXP Industrial is expected to generate 1.72 times less return on investment than National Storage. In addition to that, LXP Industrial is 1.38 times more volatile than National Storage Affiliates. It trades about 0.02 of its total potential returns per unit of risk. National Storage Affiliates is currently generating about 0.06 per unit of volatility. If you would invest  3,689  in National Storage Affiliates on November 19, 2024 and sell it today you would earn a total of  49.00  from holding National Storage Affiliates or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

LXP Industrial Trust  vs.  National Storage Affiliates

LXP Industrial Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days LXP Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, LXP Industrial is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

National Storage Aff

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LXP Industrial and National Storage

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