Correlation Between National Storage and Postal Savings
Can any of the company-specific risk be diversified away by investing in both National Storage and Postal Savings 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 National Storage and Postal Savings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Storage Affiliates and Postal Savings Bank, you can compare the effects of market volatilities on National Storage and Postal Savings 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 National Storage with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storage and Postal Savings.
Diversification Opportunities for National Storage and Postal Savings
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between National and Postal is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding National Storage Affiliates and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and National Storage 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 National Storage Affiliates are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of National Storage i.e., National Storage and Postal Savings go up and down completely randomly.
Pair Corralation between National Storage and Postal Savings
Assuming the 90 days horizon National Storage is expected to generate 5.04 times less return on investment than Postal Savings. But when comparing it to its historical volatility, National Storage Affiliates is 5.73 times less risky than Postal Savings. It trades about 0.11 of its potential returns per unit of risk. Postal Savings Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 24.00 in Postal Savings Bank on September 3, 2024 and sell it today you would earn a total of 29.00 from holding Postal Savings Bank or generate 120.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Storage Affiliates vs. Postal Savings Bank
Performance |
| Timeline |
| National Storage Aff |
| Postal Savings Bank |
National Storage and Postal Savings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Storage and Postal Savings
The main advantage of trading using opposite National Storage and Postal Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage position performs unexpectedly, Postal Savings 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 Postal Savings will offset losses from the drop in Postal Savings' long position.The idea behind National Storage Affiliates and Postal Savings Bank 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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