Correlation Between CubeSmart and Douglas Emmett

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

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

Diversification Opportunities for CubeSmart and Douglas Emmett

0.04

Correlation Coefficient

CubeSmart  Douglas Emmett

Significant diversification

The 3 months correlation between CubeSmart and Douglas is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett and CubeSmart 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 CubeSmart are associated (or correlated) with Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of CubeSmart i.e., CubeSmart and Douglas Emmett go up and down completely randomly.

Pair Corralation between CubeSmart and Douglas Emmett

Given the investment horizon of 90 days CubeSmart is expected to under-perform the Douglas Emmett. But the stock apears to be less risky and, when comparing its historical volatility, CubeSmart is 1.25 times less risky than Douglas Emmett. The stock trades about -0.1 of its potential returns per unit of risk. The Douglas Emmett is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,484  in Douglas Emmett on May 11, 2025 and sell it today you would lose (41.00) from holding Douglas Emmett or give up 2.76% of portfolio value over 90 days.

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

CubeSmart  vs.  Douglas Emmett

CubeSmart

Risk-Adjusted Performance

Weakest

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

Douglas Emmett

Risk-Adjusted Performance

Weakest

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CubeSmart and Douglas Emmett

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

The idea behind CubeSmart and Douglas Emmett 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.