Correlation Between Extra Space and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Extra Space and Cairn Homes 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 Cairn Homes 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 Cairn Homes PLC, you can compare the effects of market volatilities on Extra Space and Cairn Homes 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 Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Cairn Homes.
Diversification Opportunities for Extra Space and Cairn Homes
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Extra and Cairn is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Extra Space i.e., Extra Space and Cairn Homes go up and down completely randomly.
Pair Corralation between Extra Space and Cairn Homes
Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Cairn Homes. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.33 times less risky than Cairn Homes. The stock trades about -0.13 of its potential returns per unit of risk. The Cairn Homes PLC is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 18,620 in Cairn Homes PLC on September 12, 2024 and sell it today you would lose (380.00) from holding Cairn Homes PLC or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. Cairn Homes PLC
Performance |
| Timeline |
| Extra Space Storage |
| Cairn Homes PLC |
Extra Space and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Cairn Homes
The main advantage of trading using opposite Extra Space and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Cairn Homes 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| Extra Space vs. Hong Kong Land | Extra Space vs. Neometals | Extra Space vs. Coor Service Management | Extra Space vs. Fidelity Sustainable USD |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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