Correlation Between Stag Industrial and Pure Storage

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

By analyzing existing cross correlation between Stag Industrial and Pure Storage, you can compare the effects of market volatilities on Stag Industrial and Pure Storage 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 Pure Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stag Industrial and Pure Storage.

Diversification Opportunities for Stag Industrial and Pure Storage

-0.56

Correlation Coefficient

Stag Industrial  Pure Storage

Excellent diversification

The 3 months correlation between Stag and Pure is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Stag Industrial and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of Stag Industrial i.e., Stag Industrial and Pure Storage go up and down completely randomly.

Pair Corralation between Stag Industrial and Pure Storage

Assuming the 90 days trading horizon Stag Industrial is expected to generate 7.44 times less return on investment than Pure Storage. But when comparing it to its historical volatility, Stag Industrial is 2.23 times less risky than Pure Storage. It trades about 0.02 of its potential returns per unit of risk. Pure Storage is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,400  in Pure Storage on October 11, 2024 and sell it today you would earn a total of  3,883  from holding Pure Storage or generate 161.79% return on investment over 90 days.

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

Stag Industrial  vs.  Pure Storage

Stag Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stag Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stag Industrial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pure Storage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stag Industrial and Pure Storage

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

The idea behind Stag Industrial and Pure Storage 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.