Correlation Between Plymouth Industrial and CubeSmart

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

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

Diversification Opportunities for Plymouth Industrial and CubeSmart

0.85

Correlation Coefficient

Plymouth Industrial  CubeSmart

Very poor diversification

The 3 months correlation between Plymouth and CubeSmart is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and Plymouth 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 Plymouth Industrial REIT 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 Plymouth Industrial i.e., Plymouth Industrial and CubeSmart go up and down completely randomly.

Pair Corralation between Plymouth Industrial and CubeSmart

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to generate 1.26 times more return on investment than CubeSmart. However, Plymouth Industrial is 1.26 times more volatile than CubeSmart. It trades about -0.09 of its potential returns per unit of risk. CubeSmart is currently generating about -0.16 per unit of risk. If you would invest  1,849  in Plymouth Industrial REIT on November 28, 2024 and sell it today you would lose (187.00) from holding Plymouth Industrial REIT or give up 10.11% of portfolio value over 90 days.

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

Plymouth Industrial REIT  vs.  CubeSmart

Plymouth Industrial REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plymouth Industrial REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

CubeSmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days CubeSmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Plymouth Industrial and CubeSmart

The main advantage of trading using opposite Plymouth Industrial and CubeSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plymouth Industrial 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 Plymouth Industrial REIT 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.