Correlation Between Public Storage and Lexington Realty

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

By analyzing existing cross correlation between Public Storage and Lexington Realty Trust, you can compare the effects of market volatilities on Public Storage and Lexington 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 Public Storage with a short position of Lexington Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Storage and Lexington Realty.

Diversification Opportunities for Public Storage and Lexington Realty

0.74

Correlation Coefficient

Public Storage  Lexington Realty

Poor diversification

The 3 months correlation between Public and Lexington is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage and Lexington Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexington Realty Trust and Public Storage 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 Public Storage are associated (or correlated) with Lexington Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexington Realty Trust has no effect on the direction of Public Storage i.e., Public Storage and Lexington Realty go up and down completely randomly.

Pair Corralation between Public Storage and Lexington Realty

Assuming the 90 days trading horizon Public Storage is expected to under-perform the Lexington Realty. But the preferred stock apears to be less risky and, when comparing its historical volatility, Public Storage is 2.01 times less risky than Lexington Realty. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Lexington Realty Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,866  in Lexington Realty Trust on September 2, 2024 and sell it today you would earn a total of  136.00  from holding Lexington Realty Trust or generate 2.79% return on investment over 90 days.

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

Public Storage  vs.  Lexington Realty Trust

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lexington Realty Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lexington Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lexington Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Public Storage and Lexington Realty

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

The idea behind Public Storage and Lexington Realty Trust 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.