Correlation Between LXP Industrial and EastGroup Properties

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

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

Diversification Opportunities for LXP Industrial and EastGroup Properties

0.71

Correlation Coefficient

LXP Industrial  EastGroup Properties

Poor diversification

The 3 months correlation between LXP and EastGroup is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LXP Industrial Trust and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties and LXP 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 LXP Industrial Trust are associated (or correlated) with EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of LXP Industrial i.e., LXP Industrial and EastGroup Properties go up and down completely randomly.

Pair Corralation between LXP Industrial and EastGroup Properties

Considering the 90-day investment horizon LXP Industrial Trust is expected to under-perform the EastGroup Properties. But the stock apears to be less risky and, when comparing its historical volatility, LXP Industrial Trust is 1.2 times less risky than EastGroup Properties. The stock trades about -0.04 of its potential returns per unit of risk. The EastGroup Properties is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  15,858  in EastGroup Properties on March 7, 2024 and sell it today you would earn a total of  649.00  from holding EastGroup Properties or generate 4.09% return on investment over 90 days.

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

LXP Industrial Trust  vs.  EastGroup Properties

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 relatively invariable basic indicators, LXP Industrial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EastGroup Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental 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 LXP Industrial and EastGroup Properties

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

The idea behind LXP Industrial Trust and EastGroup 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.

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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.