Correlation Between Prologis and NIPPON PROLOGIS

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

By analyzing existing cross correlation between Prologis and NIPPON PROLOGIS REIT, you can compare the effects of market volatilities on Prologis and NIPPON PROLOGIS 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 NIPPON PROLOGIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prologis and NIPPON PROLOGIS.

Diversification Opportunities for Prologis and NIPPON PROLOGIS

0.77

Correlation Coefficient

Prologis  NIPPON PROLOGIS

Poor diversification

The 3 months correlation between Prologis and NIPPON is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Prologis and NIPPON PROLOGIS REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON PROLOGIS REIT 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 NIPPON PROLOGIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON PROLOGIS REIT has no effect on the direction of Prologis i.e., Prologis and NIPPON PROLOGIS go up and down completely randomly.

Pair Corralation between Prologis and NIPPON PROLOGIS

Assuming the 90 days trading horizon Prologis is expected to generate 1.16 times more return on investment than NIPPON PROLOGIS. However, Prologis is 1.16 times more volatile than NIPPON PROLOGIS REIT. It trades about -0.07 of its potential returns per unit of risk. NIPPON PROLOGIS REIT is currently generating about -0.22 per unit of risk. If you would invest  11,683  in Prologis on September 12, 2024 and sell it today you would lose (787.00) from holding Prologis or give up 6.74% of portfolio value over 90 days.

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

Prologis  vs.  NIPPON PROLOGIS REIT

Prologis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prologis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Prologis is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NIPPON PROLOGIS REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON PROLOGIS REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Prologis and NIPPON PROLOGIS

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

The idea behind Prologis and NIPPON PROLOGIS REIT 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.