Correlation Between Plymouth Industrial and Terreno Realty

Can any of the company-specific risk be diversified away by investing in both Plymouth Industrial and Terreno Realty 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 Terreno Realty 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 Terreno Realty, you can compare the effects of market volatilities on Plymouth Industrial and Terreno Realty 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 Terreno Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plymouth Industrial and Terreno Realty.

Diversification Opportunities for Plymouth Industrial and Terreno Realty

0.93

Correlation Coefficient

Plymouth Industrial  Terreno Realty

Almost no diversification

The 3 months correlation between Plymouth and Terreno is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Plymouth Industrial i.e., Plymouth Industrial and Terreno Realty go up and down completely randomly.

Pair Corralation between Plymouth Industrial and Terreno Realty

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to under-perform the Terreno Realty. But the stock apears to be less risky and, when comparing its historical volatility, Plymouth Industrial REIT is 1.0 times less risky than Terreno Realty. The stock trades about -0.12 of its potential returns per unit of risk. The Terreno Realty is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  6,675  in Terreno Realty on August 10, 2024 and sell it today you would lose (633.00) from holding Terreno Realty or give up 9.48% 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.  Terreno Realty

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Terreno Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terreno Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Plymouth Industrial and Terreno Realty

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

The idea behind Plymouth Industrial REIT and Terreno Realty 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.