Correlation Between Extra Space and GP Investments

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

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

Diversification Opportunities for Extra Space and GP Investments

0.33

Correlation Coefficient

Extra Space  GP Investments

Weak diversification

The 3 months correlation between Extra and GPIV33 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments and Extra Space 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 Extra Space Storage are associated (or correlated) with GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Extra Space i.e., Extra Space and GP Investments go up and down completely randomly.

Pair Corralation between Extra Space and GP Investments

Assuming the 90 days trading horizon Extra Space Storage is expected to generate 0.57 times more return on investment than GP Investments. However, Extra Space Storage is 1.74 times less risky than GP Investments. It trades about 0.14 of its potential returns per unit of risk. GP Investments is currently generating about 0.02 per unit of risk. If you would invest  18,487  in Extra Space Storage on August 31, 2024 and sell it today you would earn a total of  7,610  from holding Extra Space Storage or generate 41.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Extra Space Storage  vs.  GP Investments

Extra Space Storage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Extra Space Storage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Extra Space is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GP Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Extra Space and GP Investments

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

The idea behind Extra Space Storage and GP Investments 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.