Correlation Between Extra Space and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Extra Space and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials Co, you can compare the effects of market volatilities on Extra Space and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Vulcan Materials.
Diversification Opportunities for Extra Space and Vulcan Materials
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Extra and Vulcan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Extra Space i.e., Extra Space and Vulcan Materials go up and down completely randomly.
Pair Corralation between Extra Space and Vulcan Materials
Assuming the 90 days trading horizon Extra Space is expected to generate 1.11 times less return on investment than Vulcan Materials. But when comparing it to its historical volatility, Extra Space Storage is 1.5 times less risky than Vulcan Materials. It trades about 0.19 of its potential returns per unit of risk. Vulcan Materials Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 26,044 in Vulcan Materials Co on November 7, 2024 and sell it today you would earn a total of 1,158 from holding Vulcan Materials Co or generate 4.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.3% |
| Values | Daily Returns |
Extra Space Storage vs. Vulcan Materials Co
Performance |
| Timeline |
| Extra Space Storage |
| Vulcan Materials |
Extra Space and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Vulcan Materials
The main advantage of trading using opposite Extra Space and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| Extra Space vs. BE Semiconductor Industries | Extra Space vs. European Metals Holdings | Extra Space vs. Europa Metals | Extra Space vs. Sovereign Metals |
| Vulcan Materials vs. AcadeMedia AB | Vulcan Materials vs. Intermediate Capital Group | Vulcan Materials vs. Fulcrum Metals PLC | Vulcan Materials vs. Wheaton Precious Metals |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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