Correlation Between National Storage and Lexington Realty

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

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

Diversification Opportunities for National Storage and Lexington Realty

0.84

Correlation Coefficient

National Storage  Lexington Realty

Very poor diversification

The 3 months correlation between National and Lexington is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding National Storage Affiliates and Lexington Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexington Realty Trust and National Storage 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 National Storage Affiliates are associated (or correlated) with Lexington Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexington Realty Trust has no effect on the direction of National Storage i.e., National Storage and Lexington Realty go up and down completely randomly.

Pair Corralation between National Storage and Lexington Realty

Assuming the 90 days trading horizon National Storage is expected to generate 3.65 times less return on investment than Lexington Realty. In addition to that, National Storage is 2.64 times more volatile than Lexington Realty Trust. It trades about 0.01 of its total potential returns per unit of risk. Lexington Realty Trust is currently generating about 0.07 per unit of volatility. If you would invest  4,319  in Lexington Realty Trust on August 31, 2024 and sell it today you would earn a total of  683.00  from holding Lexington Realty Trust or generate 15.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	34.4%
Values	Daily Returns

National Storage Affiliates  vs.  Lexington Realty Trust

National Storage Aff

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Storage Affiliates are ranked lower than 7 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Lexington Realty Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lexington Realty Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lexington Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with National Storage and Lexington Realty

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

The idea behind National Storage Affiliates and Lexington Realty Trust 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.

Check out your portfolio center.

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.