Correlation Between Prologis and CubeSmart

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

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

Diversification Opportunities for Prologis and CubeSmart

0.32

Correlation Coefficient

Prologis  CubeSmart

Weak diversification

The 3 months correlation between Prologis and CubeSmart is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Prologis and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and Prologis 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 Prologis are associated (or correlated) with CubeSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubeSmart has no effect on the direction of Prologis i.e., Prologis and CubeSmart go up and down completely randomly.

Pair Corralation between Prologis and CubeSmart

Considering the 90-day investment horizon Prologis is expected to generate 1.3 times more return on investment than CubeSmart. However, Prologis is 1.3 times more volatile than CubeSmart. It trades about 0.06 of its potential returns per unit of risk. CubeSmart is currently generating about 0.01 per unit of risk. If you would invest  10,417  in Prologis on December 30, 2024 and sell it today you would earn a total of  628.00  from holding Prologis or generate 6.03% return on investment over 90 days.

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

Prologis  vs.  CubeSmart

Prologis

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prologis are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Prologis may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CubeSmart

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CubeSmart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, CubeSmart is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Prologis and CubeSmart

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

The idea behind Prologis and CubeSmart 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 Transaction History module to view history of all your transactions and understand their impact on performance.