Correlation Between Intermediate Capital and Extra Space

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

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

Diversification Opportunities for Intermediate Capital and Extra Space

0.37

Correlation Coefficient

Intermediate Capital  Extra Space

Weak diversification

The 3 months correlation between Intermediate and Extra is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Capital Group and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and Intermediate Capital 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 Intermediate Capital Group are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Intermediate Capital i.e., Intermediate Capital and Extra Space go up and down completely randomly.

Pair Corralation between Intermediate Capital and Extra Space

Assuming the 90 days trading horizon Intermediate Capital Group is expected to generate 1.21 times more return on investment than Extra Space. However, Intermediate Capital is 1.21 times more volatile than Extra Space Storage. It trades about -0.05 of its potential returns per unit of risk. Extra Space Storage is currently generating about -0.15 per unit of risk. If you would invest  228,436  in Intermediate Capital Group on September 20, 2024 and sell it today you would lose (15,036) from holding Intermediate Capital Group or give up 6.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Intermediate Capital Group  vs.  Extra Space Storage

Intermediate Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intermediate Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Intermediate Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Extra Space Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Extra Space Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Intermediate Capital and Extra Space

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

The idea behind Intermediate Capital Group and Extra Space Storage 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.