Correlation Between Extra Space and Warehouses
Can any of the company-specific risk be diversified away by investing in both Extra Space and Warehouses 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 Warehouses 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 Warehouses De Pauw, you can compare the effects of market volatilities on Extra Space and Warehouses 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 Warehouses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Warehouses.
Diversification Opportunities for Extra Space and Warehouses
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Extra and Warehouses is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw 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 Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of Extra Space i.e., Extra Space and Warehouses go up and down completely randomly.
Pair Corralation between Extra Space and Warehouses
Assuming the 90 days horizon Extra Space Storage is expected to under-perform the Warehouses. In addition to that, Extra Space is 1.13 times more volatile than Warehouses De Pauw. It trades about -0.4 of its total potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.31 per unit of volatility. If you would invest 2,068 in Warehouses De Pauw on September 26, 2024 and sell it today you would lose (172.00) from holding Warehouses De Pauw or give up 8.32% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Extra Space Storage vs. Warehouses De Pauw
Performance |
Timeline |
Extra Space Storage |
Warehouses De Pauw |
Extra Space and Warehouses Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Extra Space and Warehouses
The main advantage of trading using opposite Extra Space and Warehouses positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Warehouses 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 Warehouses will offset losses from the drop in Warehouses' long position.Extra Space vs. First Industrial Realty | Extra Space vs. Warehouses De Pauw | Extra Space vs. National Storage Affiliates | Extra Space vs. Montea Comm VA |
Warehouses vs. Extra Space Storage | Warehouses vs. First Industrial Realty | Warehouses vs. National Storage Affiliates | Warehouses vs. Montea Comm VA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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