Correlation Between Public Storage and Equity Residential

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

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

Diversification Opportunities for Public Storage and Equity Residential

0.77

Correlation Coefficient

Public Storage  Equity Residential

Poor diversification

The 3 months correlation between Public and Equity is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Public Storage and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Public Storage 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 Public Storage are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Public Storage i.e., Public Storage and Equity Residential go up and down completely randomly.

Pair Corralation between Public Storage and Equity Residential

Considering the 90-day investment horizon Public Storage is expected to generate 1.04 times more return on investment than Equity Residential. However, Public Storage is 1.04 times more volatile than Equity Residential. It trades about -0.07 of its potential returns per unit of risk. Equity Residential is currently generating about -0.13 per unit of risk. If you would invest  29,734  in Public Storage on May 3, 2025 and sell it today you would lose (1,845) from holding Public Storage or give up 6.21% of portfolio value over 90 days.

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

Public Storage  vs.  Equity Residential

Public Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Public Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Public Storage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Equity Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain 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 Public Storage and Equity Residential

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

The idea behind Public Storage and Equity Residential 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.