Correlation Between STAG Industrial and NIPPON PROLOGIS

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

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

Diversification Opportunities for STAG Industrial and NIPPON PROLOGIS

0.48

Correlation Coefficient

STAG Industrial  NIPPON PROLOGIS

Very weak diversification

The 3 months correlation between STAG and NIPPON is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding STAG Industrial 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 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 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 STAG Industrial i.e., STAG Industrial and NIPPON PROLOGIS go up and down completely randomly.

Pair Corralation between STAG Industrial and NIPPON PROLOGIS

Assuming the 90 days horizon STAG Industrial is expected to generate 2.26 times less return on investment than NIPPON PROLOGIS. But when comparing it to its historical volatility, STAG Industrial is 1.35 times less risky than NIPPON PROLOGIS. It trades about 0.03 of its potential returns per unit of risk. NIPPON PROLOGIS REIT is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  141,000  in NIPPON PROLOGIS REIT on December 4, 2024 and sell it today you would earn a total of  6,000  from holding NIPPON PROLOGIS REIT or generate 4.26% return on investment over 90 days.

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

STAG Industrial  vs.  NIPPON PROLOGIS REIT

STAG Industrial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STAG Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

NIPPON PROLOGIS REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON PROLOGIS REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 STAG Industrial and NIPPON PROLOGIS

The main advantage of trading using opposite STAG Industrial and NIPPON PROLOGIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STAG Industrial 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 STAG Industrial 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 Transaction History module to view history of all your transactions and understand their impact on performance.