Correlation Between Aeorema Communications and Extra Space
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Extra Space 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 Aeorema Communications and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and Extra Space Storage, you can compare the effects of market volatilities on Aeorema Communications and Extra Space 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 Aeorema Communications with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Extra Space.
Diversification Opportunities for Aeorema Communications and Extra Space
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aeorema and Extra is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and Aeorema Communications 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 Aeorema Communications Plc are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Extra Space go up and down completely randomly.
Pair Corralation between Aeorema Communications and Extra Space
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Extra Space. But the stock apears to be less risky and, when comparing its historical volatility, Aeorema Communications Plc is 1.21 times less risky than Extra Space. The stock trades about -0.05 of its potential returns per unit of risk. The Extra Space Storage is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 14,158 in Extra Space Storage on August 31, 2024 and sell it today you would earn a total of 3,067 from holding Extra Space Storage or generate 21.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
Aeorema Communications Plc vs. Extra Space Storage
Performance |
| Timeline |
| Aeorema Communications |
| Extra Space Storage |
Aeorema Communications and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and Extra Space
The main advantage of trading using opposite Aeorema Communications and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.| Aeorema Communications vs. Ironveld Plc | Aeorema Communications vs. Impax Environmental Markets | Aeorema Communications vs. Hochschild Mining plc | Aeorema Communications vs. Endeavour Mining Corp |
| Extra Space vs. Neometals | Extra Space vs. Coor Service Management | Extra Space vs. Aeorema Communications Plc | Extra Space vs. JLEN Environmental Assets |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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