Correlation Between Plymouth Industrial and National Storage

Can any of the company-specific risk be diversified away by investing in both Plymouth 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 Plymouth 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 Plymouth Industrial REIT and National Storage Affiliates, you can compare the effects of market volatilities on Plymouth 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 Plymouth Industrial with a short position of National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plymouth Industrial and National Storage.

Diversification Opportunities for Plymouth Industrial and National Storage

0.85

Correlation Coefficient

Plymouth Industrial  National Storage

Very poor diversification

The 3 months correlation between Plymouth and National is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT 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 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 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 Plymouth Industrial i.e., Plymouth Industrial and National Storage go up and down completely randomly.

Pair Corralation between Plymouth Industrial and National Storage

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to generate 1.22 times more return on investment than National Storage. However, Plymouth Industrial is 1.22 times more volatile than National Storage Affiliates. It trades about -0.09 of its potential returns per unit of risk. National Storage Affiliates is currently generating about -0.17 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.  National Storage Affiliates

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.

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 Plymouth Industrial and National Storage

The main advantage of trading using opposite Plymouth Industrial and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plymouth 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 Plymouth Industrial REIT 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.