Correlation Between Essex Property and CubeSmart

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

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

Diversification Opportunities for Essex Property and CubeSmart

0.66

Correlation Coefficient

Essex Property  CubeSmart

Poor diversification

The 3 months correlation between Essex and CubeSmart is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Essex Property Trust and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and Essex Property 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 Essex Property Trust are associated (or correlated) with CubeSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubeSmart has no effect on the direction of Essex Property i.e., Essex Property and CubeSmart go up and down completely randomly.

Pair Corralation between Essex Property and CubeSmart

Considering the 90-day investment horizon Essex Property Trust is expected to under-perform the CubeSmart. In addition to that, Essex Property is 1.22 times more volatile than CubeSmart. It trades about -0.1 of its total potential returns per unit of risk. CubeSmart is currently generating about -0.05 per unit of volatility. If you would invest  4,165  in CubeSmart on May 7, 2025 and sell it today you would lose (193.00) from holding CubeSmart or give up 4.63% of portfolio value over 90 days.

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

Essex Property Trust  vs.  CubeSmart

Essex Property Trust

Risk-Adjusted Performance

Weakest

Over the last 90 days Essex Property Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 rather sound fundamental drivers, CubeSmart is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Essex Property and CubeSmart

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

The idea behind Essex Property Trust and CubeSmart 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.