Correlation Between Extra Space and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Extra Space and Spirent Communications 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 Spirent Communications 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 Spirent Communications plc, you can compare the effects of market volatilities on Extra Space and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Spirent Communications.
Diversification Opportunities for Extra Space and Spirent Communications
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Extra and Spirent is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Extra Space i.e., Extra Space and Spirent Communications go up and down completely randomly.
Pair Corralation between Extra Space and Spirent Communications
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 2.26 times more return on investment than Spirent Communications. However, Extra Space is 2.26 times more volatile than Spirent Communications plc. It trades about 0.1 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.11 per unit of risk. If you would invest 16,580 in Extra Space Storage on September 1, 2024 and sell it today you would earn a total of 645.00 from holding Extra Space Storage or generate 3.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. Spirent Communications plc
Performance |
| Timeline |
| Extra Space Storage |
| Spirent Communications |
Extra Space and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Spirent Communications
The main advantage of trading using opposite Extra Space and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Extra Space vs. AcadeMedia AB | Extra Space vs. Ecclesiastical Insurance Office | Extra Space vs. Fortune Brands Home | Extra Space vs. G5 Entertainment AB |
| Spirent Communications vs. Gaztransport et Technigaz | Spirent Communications vs. United Airlines Holdings | Spirent Communications vs. Federal Realty Investment | Spirent Communications vs. Kaufman Et Broad |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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