Correlation Between National Storage and Southern Cross

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

By analyzing existing cross correlation between National Storage REIT and Southern Cross Gold, you can compare the effects of market volatilities on National Storage and Southern Cross 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 Southern Cross. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storage and Southern Cross.

Diversification Opportunities for National Storage and Southern Cross

-0.28

Correlation Coefficient

National Storage  Southern Cross

Very good diversification

The 3 months correlation between National and Southern is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Southern Cross Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Cross Gold 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 REIT are associated (or correlated) with Southern Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Cross Gold has no effect on the direction of National Storage i.e., National Storage and Southern Cross go up and down completely randomly.

Pair Corralation between National Storage and Southern Cross

Assuming the 90 days trading horizon National Storage REIT is expected to under-perform the Southern Cross. But the stock apears to be less risky and, when comparing its historical volatility, National Storage REIT is 4.86 times less risky than Southern Cross. The stock trades about -0.04 of its potential returns per unit of risk. The Southern Cross Gold is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  275.00  in Southern Cross Gold on September 14, 2024 and sell it today you would earn a total of  141.00  from holding Southern Cross Gold or generate 51.27% return on investment over 90 days.

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

National Storage REIT  vs.  Southern Cross Gold

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Storage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Southern Cross Gold

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Cross Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Southern Cross unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Storage and Southern Cross

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

The idea behind National Storage REIT and Southern Cross Gold 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.