Correlation Between Plymouth Industrial and Terreno Realty

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

Diversification Opportunities for Plymouth Industrial and Terreno Realty

-0.5

Correlation Coefficient

Plymouth Industrial  Terreno Realty

Very good diversification

The 3 months correlation between Plymouth and Terreno is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Plymouth Industrial i.e., Plymouth Industrial and Terreno Realty go up and down completely randomly.

Pair Corralation between Plymouth Industrial and Terreno Realty

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to under-perform the Terreno Realty. In addition to that, Plymouth Industrial is 1.1 times more volatile than Terreno Realty. It trades about -0.04 of its total potential returns per unit of risk. Terreno Realty is currently generating about 0.09 per unit of volatility. If you would invest  5,853  in Terreno Realty on December 30, 2024 and sell it today you would earn a total of  420.00  from holding Terreno Realty or generate 7.18% return on investment over 90 days.

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

Plymouth Industrial REIT  vs.  Terreno Realty

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.

Terreno Realty

Risk-Adjusted Performance

Modest

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

Pair Trading with Plymouth Industrial and Terreno Realty

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

The idea behind Plymouth Industrial REIT and Terreno Realty 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.