Correlation Between Innovative Industrial and CubeSmart

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

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

Diversification Opportunities for Innovative Industrial and CubeSmart

0.43

Correlation Coefficient

Innovative Industrial  CubeSmart

Very weak diversification

The 3 months correlation between Innovative and CubeSmart is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Industrial Properti and CubeSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubeSmart and Innovative 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 Innovative Industrial Properties 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 Innovative Industrial i.e., Innovative Industrial and CubeSmart go up and down completely randomly.

Pair Corralation between Innovative Industrial and CubeSmart

Given the investment horizon of 90 days Innovative Industrial Properties is expected to under-perform the CubeSmart. In addition to that, Innovative Industrial is 1.92 times more volatile than CubeSmart. It trades about -0.23 of its total potential returns per unit of risk. CubeSmart is currently generating about 0.11 per unit of volatility. If you would invest  4,801  in CubeSmart on August 27, 2024 and sell it today you would earn a total of  185.00  from holding CubeSmart or generate 3.85% return on investment over 90 days.

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

Innovative Industrial Properti  vs.  CubeSmart

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CubeSmart

Risk-Adjusted Performance

0 of 100

Very Weak

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovative Industrial and CubeSmart

The main advantage of trading using opposite Innovative Industrial and CubeSmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovative Industrial 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 Innovative Industrial Properties 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.