Correlation Between Extra Space and STM Group
Can any of the company-specific risk be diversified away by investing in both Extra Space and STM 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 STM 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 STM Group Plc, you can compare the effects of market volatilities on Extra Space and STM 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 STM Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and STM Group.
Diversification Opportunities for Extra Space and STM Group
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Extra and STM is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and STM Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STM 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 STM Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STM Group Plc has no effect on the direction of Extra Space i.e., Extra Space and STM Group go up and down completely randomly.
Pair Corralation between Extra Space and STM Group
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.39 times more return on investment than STM Group. However, Extra Space is 1.39 times more volatile than STM Group Plc. It trades about 0.08 of its potential returns per unit of risk. STM Group Plc is currently generating about 0.04 per unit of risk. If you would invest 13,711 in Extra Space Storage on August 25, 2024 and sell it today you would earn a total of 3,051 from holding Extra Space Storage or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 91.1% |
| Values | Daily Returns |
Extra Space Storage vs. STM Group Plc
Performance |
| Timeline |
| Extra Space Storage |
| STM Group Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Extra Space and STM Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and STM Group
The main advantage of trading using opposite Extra Space and STM Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, STM 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 STM Group will offset losses from the drop in STM Group's long position.| Extra Space vs. Fonix Mobile plc | Extra Space vs. Gamma Communications PLC | Extra Space vs. Zoom Video Communications | Extra Space vs. Zinc Media Group |
| STM Group vs. Wheaton Precious Metals | STM Group vs. Greenroc Mining PLC | STM Group vs. Cornish Metals | STM Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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