Correlation Between Plymouth Industrial and STAG Industrial

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

Diversification Opportunities for Plymouth Industrial and STAG Industrial

-0.19

Correlation Coefficient

Plymouth Industrial  STAG Industrial

Good diversification

The 3 months correlation between Plymouth and STAG is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT and STAG Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAG Industrial 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 STAG Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAG Industrial has no effect on the direction of Plymouth Industrial i.e., Plymouth Industrial and STAG Industrial go up and down completely randomly.

Pair Corralation between Plymouth Industrial and STAG Industrial

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to under-perform the STAG Industrial. In addition to that, Plymouth Industrial is 1.15 times more volatile than STAG Industrial. It trades about -0.04 of its total potential returns per unit of risk. STAG Industrial is currently generating about 0.08 per unit of volatility. If you would invest  3,340  in STAG Industrial on December 29, 2024 and sell it today you would earn a total of  219.00  from holding STAG Industrial or generate 6.56% return on investment over 90 days.

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

Plymouth Industrial REIT  vs.  STAG Industrial

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 very healthy basic indicators, Plymouth Industrial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

STAG Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STAG Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, STAG Industrial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Plymouth Industrial and STAG Industrial

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

The idea behind Plymouth Industrial REIT and STAG Industrial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.