Correlation Between Extra Space and Dotdigital Group

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Can any of the company-specific risk be diversified away by investing in both Extra Space and Dotdigital Group 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 Dotdigital Group 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 Dotdigital Group Plc, you can compare the effects of market volatilities on Extra Space and Dotdigital Group 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 Dotdigital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Dotdigital Group.

Diversification Opportunities for Extra Space and Dotdigital Group

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Extra and Dotdigital is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Dotdigital Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dotdigital Group 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 Dotdigital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dotdigital Group Plc has no effect on the direction of Extra Space i.e., Extra Space and Dotdigital Group go up and down completely randomly.

Pair Corralation between Extra Space and Dotdigital Group

Assuming the 90 days trading horizon Extra Space Storage is expected to generate 0.41 times more return on investment than Dotdigital Group. However, Extra Space Storage is 2.43 times less risky than Dotdigital Group. It trades about 0.21 of its potential returns per unit of risk. Dotdigital Group Plc is currently generating about 0.07 per unit of risk. If you would invest  14,865  in Extra Space Storage on November 3, 2024 and sell it today you would earn a total of  663.00  from holding Extra Space Storage or generate 4.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Extra Space Storage  vs.  Dotdigital Group Plc

 Performance 
       Timeline  
Extra Space Storage 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 comparatively stable basic indicators, Extra Space is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Dotdigital Group Plc 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Dotdigital Group Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dotdigital Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Extra Space and Dotdigital Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Extra Space and Dotdigital Group

The main advantage of trading using opposite Extra Space and Dotdigital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Dotdigital Group 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 Dotdigital Group will offset losses from the drop in Dotdigital Group's long position.
The idea behind Extra Space Storage and Dotdigital Group Plc 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.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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