Correlation Between Extra Space and Cass Information

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

Diversification Opportunities for Extra Space and Cass Information

0.01

Correlation Coefficient

Extra Space  Cass Information

Significant diversification

The 3 months correlation between Extra and Cass is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems 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 Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Extra Space i.e., Extra Space and Cass Information go up and down completely randomly.

Pair Corralation between Extra Space and Cass Information

Assuming the 90 days horizon Extra Space is expected to generate 5.64 times less return on investment than Cass Information. But when comparing it to its historical volatility, Extra Space Storage is 1.39 times less risky than Cass Information. It trades about 0.03 of its potential returns per unit of risk. Cass Information Systems is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,733  in Cass Information Systems on September 5, 2024 and sell it today you would earn a total of  516.00  from holding Cass Information Systems or generate 13.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Extra Space Storage  vs.  Cass Information Systems

Extra Space Storage

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Extra Space Storage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Extra Space is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cass Information Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cass Information reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and Cass Information

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

The idea behind Extra Space Storage and Cass Information Systems 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.