Correlation Between Urban Edge and National Storage

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

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

Diversification Opportunities for Urban Edge and National Storage

-0.07

Correlation Coefficient

Urban Edge  National Storage

Good diversification

The 3 months correlation between Urban and National is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Urban Edge Properties and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff and Urban Edge 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 Urban Edge Properties are associated (or correlated) with National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of Urban Edge i.e., Urban Edge and National Storage go up and down completely randomly.

Pair Corralation between Urban Edge and National Storage

Allowing for the 90-day total investment horizon Urban Edge Properties is expected to under-perform the National Storage. In addition to that, Urban Edge is 1.04 times more volatile than National Storage Affiliates. It trades about -0.11 of its total potential returns per unit of risk. National Storage Affiliates is currently generating about 0.05 per unit of volatility. If you would invest  3,678  in National Storage Affiliates on December 28, 2024 and sell it today you would earn a total of  151.00  from holding National Storage Affiliates or generate 4.11% return on investment over 90 days.

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

Urban Edge Properties  vs.  National Storage Affiliates

Urban Edge Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Urban Edge Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

National Storage Aff

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National Storage Affiliates are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, National Storage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Urban Edge and National Storage

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

The idea behind Urban Edge Properties and National Storage Affiliates 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.