Correlation Between STAG Industrial and Boston Properties

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

By analyzing existing cross correlation between STAG Industrial and Boston Properties, you can compare the effects of market volatilities on STAG Industrial and Boston Properties 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 STAG Industrial with a short position of Boston Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of STAG Industrial and Boston Properties.

Diversification Opportunities for STAG Industrial and Boston Properties

0.6

Correlation Coefficient

STAG Industrial  Boston Properties

Poor diversification

The 3 months correlation between STAG and Boston is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding STAG Industrial and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and STAG 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 STAG Industrial are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of STAG Industrial i.e., STAG Industrial and Boston Properties go up and down completely randomly.

Pair Corralation between STAG Industrial and Boston Properties

Given the investment horizon of 90 days STAG Industrial is expected to generate 0.67 times more return on investment than Boston Properties. However, STAG Industrial is 1.5 times less risky than Boston Properties. It trades about -0.03 of its potential returns per unit of risk. Boston Properties is currently generating about -0.11 per unit of risk. If you would invest  3,652  in STAG Industrial on November 29, 2024 and sell it today you would lose (95.00) from holding STAG Industrial or give up 2.6% of portfolio value over 90 days.

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

STAG Industrial  vs.  Boston Properties

STAG Industrial

Risk-Adjusted Performance

Very Weak

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

Boston Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with STAG Industrial and Boston Properties

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

The idea behind STAG Industrial and Boston Properties 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.