Correlation Between Plymouth Industrial and LXP Industrial

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

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

Diversification Opportunities for Plymouth Industrial and LXP Industrial

0.95

Correlation Coefficient

Plymouth Industrial  LXP Industrial

Almost no diversification

The 3 months correlation between Plymouth and LXP is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT and LXP Industrial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LXP Industrial Trust and Plymouth 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 Plymouth Industrial REIT are associated (or correlated) with LXP Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LXP Industrial Trust has no effect on the direction of Plymouth Industrial i.e., Plymouth Industrial and LXP Industrial go up and down completely randomly.

Pair Corralation between Plymouth Industrial and LXP Industrial

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to under-perform the LXP Industrial. In addition to that, Plymouth Industrial is 1.39 times more volatile than LXP Industrial Trust. It trades about -0.18 of its total potential returns per unit of risk. LXP Industrial Trust is currently generating about -0.03 per unit of volatility. If you would invest  945.00  in LXP Industrial Trust on August 28, 2024 and sell it today you would lose (12.00) from holding LXP Industrial Trust or give up 1.27% of portfolio value over 90 days.

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

Plymouth Industrial REIT  vs.  LXP Industrial Trust

Plymouth Industrial REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plymouth Industrial REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

LXP Industrial Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LXP Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak 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.

Pair Trading with Plymouth Industrial and LXP Industrial

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

The idea behind Plymouth Industrial REIT and LXP Industrial Trust 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.