Correlation Between Extra Space and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Extra Space and Meta Platforms 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 Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on Extra Space and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Meta Platforms.
Diversification Opportunities for Extra Space and Meta Platforms
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Extra and Meta is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Extra Space i.e., Extra Space and Meta Platforms go up and down completely randomly.
Pair Corralation between Extra Space and Meta Platforms
Assuming the 90 days trading horizon Extra Space is expected to generate 13.56 times less return on investment than Meta Platforms. In addition to that, Extra Space is 1.28 times more volatile than Meta Platforms. It trades about 0.01 of its total potential returns per unit of risk. Meta Platforms is currently generating about 0.22 per unit of volatility. If you would invest 10,185 in Meta Platforms on September 10, 2024 and sell it today you would earn a total of 3,078 from holding Meta Platforms or generate 30.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Extra Space Storage vs. Meta Platforms
Performance |
Timeline |
Extra Space Storage |
Meta Platforms |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Extra Space and Meta Platforms Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Extra Space and Meta Platforms
The main advantage of trading using opposite Extra Space and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.Extra Space vs. Spotify Technology SA | Extra Space vs. Bemobi Mobile Tech | Extra Space vs. Waste Management | Extra Space vs. Technos SA |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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