Correlation Between Extra Space and PagSeguro Digital

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Can any of the company-specific risk be diversified away by investing in both Extra Space and PagSeguro Digital 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 PagSeguro Digital 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 PagSeguro Digital, you can compare the effects of market volatilities on Extra Space and PagSeguro Digital 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 PagSeguro Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and PagSeguro Digital.

Diversification Opportunities for Extra Space and PagSeguro Digital

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Extra and PagSeguro is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital 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 PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of Extra Space i.e., Extra Space and PagSeguro Digital go up and down completely randomly.

Pair Corralation between Extra Space and PagSeguro Digital

Assuming the 90 days trading horizon Extra Space Storage is expected to generate 0.91 times more return on investment than PagSeguro Digital. However, Extra Space Storage is 1.1 times less risky than PagSeguro Digital. It trades about 0.08 of its potential returns per unit of risk. PagSeguro Digital is currently generating about -0.07 per unit of risk. If you would invest  24,168  in Extra Space Storage on September 6, 2024 and sell it today you would earn a total of  2,638  from holding Extra Space Storage or generate 10.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Extra Space Storage  vs.  PagSeguro Digital

 Performance 
       Timeline  
Extra Space Storage 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Extra Space Storage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Extra Space may actually be approaching a critical reversion point that can send shares even higher in January 2025.
PagSeguro Digital 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PagSeguro Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Extra Space and PagSeguro Digital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Extra Space and PagSeguro Digital

The main advantage of trading using opposite Extra Space and PagSeguro Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, PagSeguro Digital 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 PagSeguro Digital will offset losses from the drop in PagSeguro Digital's long position.
The idea behind Extra Space Storage and PagSeguro Digital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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