Correlation Between Life Storage and Boston Properties

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Can any of the company-specific risk be diversified away by investing in both Life Storage and Boston Properties 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 Life Storage and Boston Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Storage and Boston Properties, you can compare the effects of market volatilities on Life Storage and Boston Properties 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 Life Storage with a short position of Boston Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Storage and Boston Properties.

Diversification Opportunities for Life Storage and Boston Properties

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between Life Storage and Boston is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Life Storage and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Life 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 Life Storage are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Life Storage i.e., Life Storage and Boston Properties go up and down completely randomly.

Pair Corralation between Life Storage and Boston Properties

Considering the 90-day investment horizon Life Storage is expected to generate 0.96 times more return on investment than Boston Properties. However, Life Storage is 1.04 times less risky than Boston Properties. It trades about 0.05 of its potential returns per unit of risk. Boston Properties is currently generating about -0.05 per unit of risk. If you would invest  10,894  in Life Storage on May 9, 2022 and sell it today you would earn a total of  1,972  from holding Life Storage or generate 18.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Life Storage  vs.  Boston Properties

 Performance (%) 
       Timeline  
Life Storage 
Life Storage Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Life Storage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly sluggish basic indicators, Life Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Life Storage Price Channel

Boston Properties 
Boston Performance
0 of 100
Over the last 90 days Boston Properties 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 September 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Boston Price Channel

Life Storage and Boston Properties Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Life Storage and Boston Properties

The main advantage of trading using opposite Life Storage and Boston Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Storage position performs unexpectedly, Boston Properties 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 Boston Properties will offset losses from the drop in Boston Properties' long position.
The idea behind Life Storage and Boston Properties 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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