Correlation Between Extra Space and Diversified Energy
Can any of the company-specific risk be diversified away by investing in both Extra Space and Diversified Energy 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 Diversified Energy 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 Diversified Energy, you can compare the effects of market volatilities on Extra Space and Diversified Energy 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 Diversified Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Diversified Energy.
Diversification Opportunities for Extra Space and Diversified Energy
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Extra and Diversified is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Diversified Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Energy 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 Diversified Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Energy has no effect on the direction of Extra Space i.e., Extra Space and Diversified Energy go up and down completely randomly.
Pair Corralation between Extra Space and Diversified Energy
Assuming the 90 days trading horizon Extra Space is expected to generate 86.28 times less return on investment than Diversified Energy. But when comparing it to its historical volatility, Extra Space Storage is 32.8 times less risky than Diversified Energy. It trades about 0.03 of its potential returns per unit of risk. Diversified Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 246,547 in Diversified Energy on August 26, 2024 and sell it today you would lose (119,447) from holding Diversified Energy or give up 48.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.01% |
| Values | Daily Returns |
Extra Space Storage vs. Diversified Energy
Performance |
| Timeline |
| Extra Space Storage |
| Diversified Energy |
Extra Space and Diversified Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Diversified Energy
The main advantage of trading using opposite Extra Space and Diversified Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Diversified Energy 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 Diversified Energy will offset losses from the drop in Diversified Energy's long position.| Extra Space vs. Samsung Electronics Co | Extra Space vs. Samsung Electronics Co | Extra Space vs. Hyundai Motor | Extra Space vs. Toyota Motor Corp |
| Diversified Energy vs. Tyson Foods Cl | Diversified Energy vs. Teradata Corp | Diversified Energy vs. Public Storage | Diversified Energy 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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