Correlation Between Extra Space and Advanced Medical
Can any of the company-specific risk be diversified away by investing in both Extra Space and Advanced Medical 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 Advanced Medical 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 Advanced Medical Solutions, you can compare the effects of market volatilities on Extra Space and Advanced Medical 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 Advanced Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Advanced Medical.
Diversification Opportunities for Extra Space and Advanced Medical
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Extra and Advanced is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol 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 Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Extra Space i.e., Extra Space and Advanced Medical go up and down completely randomly.
Pair Corralation between Extra Space and Advanced Medical
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 0.97 times more return on investment than Advanced Medical. However, Extra Space Storage is 1.03 times less risky than Advanced Medical. It trades about -0.21 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about -0.29 per unit of risk. If you would invest 15,777 in Extra Space Storage on October 12, 2024 and sell it today you would lose (1,070) from holding Extra Space Storage or give up 6.78% 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. Advanced Medical Solutions
Performance |
| Timeline |
| Extra Space Storage |
| Advanced Medical Sol |
Extra Space and Advanced Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Advanced Medical
The main advantage of trading using opposite Extra Space and Advanced Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Advanced Medical 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 Advanced Medical will offset losses from the drop in Advanced Medical's long position.| Extra Space vs. URU Metals | Extra Space vs. Capital Metals PLC | Extra Space vs. Panther Metals PLC | Extra Space vs. Travel Leisure Co |
| Advanced Medical vs. Alliance Data Systems | Advanced Medical vs. Fidelity National Information | Advanced Medical vs. UNIQA Insurance Group | Advanced Medical vs. Extra Space Storage |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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