Correlation Between Extra Space and Target Healthcare
Can any of the company-specific risk be diversified away by investing in both Extra Space and Target Healthcare 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 Target Healthcare 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 Target Healthcare REIT, you can compare the effects of market volatilities on Extra Space and Target Healthcare 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 Target Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Target Healthcare.
Diversification Opportunities for Extra Space and Target Healthcare
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Extra and Target is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Target Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Healthcare REIT 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 Target Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Healthcare REIT has no effect on the direction of Extra Space i.e., Extra Space and Target Healthcare go up and down completely randomly.
Pair Corralation between Extra Space and Target Healthcare
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.42 times more return on investment than Target Healthcare. However, Extra Space is 1.42 times more volatile than Target Healthcare REIT. It trades about 0.17 of its potential returns per unit of risk. Target Healthcare REIT is currently generating about -0.15 per unit of risk. If you would invest 16,203 in Extra Space Storage on September 3, 2024 and sell it today you would earn a total of 1,022 from holding Extra Space Storage or generate 6.31% 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. Target Healthcare REIT
Performance |
| Timeline |
| Extra Space Storage |
| Target Healthcare REIT |
Extra Space and Target Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Target Healthcare
The main advantage of trading using opposite Extra Space and Target Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Target Healthcare 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 Target Healthcare will offset losses from the drop in Target Healthcare's long position.| Extra Space vs. Gaztransport et Technigaz | Extra Space vs. Summit Materials Cl | Extra Space vs. DFS Furniture PLC | Extra Space vs. Fevertree Drinks Plc |
| Target Healthcare vs. Made Tech Group | Target Healthcare vs. Allianz Technology Trust | Target Healthcare vs. AIM ImmunoTech | Target Healthcare vs. TechnipFMC PLC |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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