Correlation Between SEGRO Plc and NIPPON PROLOGIS

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

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

Diversification Opportunities for SEGRO Plc and NIPPON PROLOGIS

0.62

Correlation Coefficient

SEGRO Plc  NIPPON PROLOGIS

Poor diversification

The 3 months correlation between SEGRO and NIPPON is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SEGRO Plc 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 SEGRO Plc 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 SEGRO Plc 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 SEGRO Plc i.e., SEGRO Plc and NIPPON PROLOGIS go up and down completely randomly.

Pair Corralation between SEGRO Plc and NIPPON PROLOGIS

Assuming the 90 days trading horizon SEGRO Plc is expected to under-perform the NIPPON PROLOGIS. In addition to that, SEGRO Plc is 1.3 times more volatile than NIPPON PROLOGIS REIT. It trades about -0.07 of its total potential returns per unit of risk. NIPPON PROLOGIS REIT is currently generating about -0.07 per unit of volatility. If you would invest  153,000  in NIPPON PROLOGIS REIT on September 4, 2024 and sell it today you would lose (10,000) from holding NIPPON PROLOGIS REIT or give up 6.54% of portfolio value over 90 days.

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

SEGRO Plc  vs.  NIPPON PROLOGIS REIT

SEGRO Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEGRO Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 nearly stable basic indicators, NIPPON PROLOGIS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SEGRO Plc and NIPPON PROLOGIS

The main advantage of trading using opposite SEGRO Plc and NIPPON PROLOGIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEGRO Plc 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 SEGRO Plc 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.