Correlation Between Extra Space and American Airlines
Can any of the company-specific risk be diversified away by investing in both Extra Space and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Extra Space and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and American Airlines.
Diversification Opportunities for Extra Space and American Airlines
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Extra and American is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Extra Space i.e., Extra Space and American Airlines go up and down completely randomly.
Pair Corralation between Extra Space and American Airlines
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 0.75 times more return on investment than American Airlines. However, Extra Space Storage is 1.33 times less risky than American Airlines. It trades about 0.04 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.38 per unit of risk. If you would invest 22,987 in Extra Space Storage on November 28, 2024 and sell it today you would earn a total of 235.00 from holding Extra Space Storage or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. American Airlines Group
Performance |
| Timeline |
| Extra Space Storage |
| American Airlines |
Extra Space and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and American Airlines
The main advantage of trading using opposite Extra Space and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Extra Space vs. United Rentals | Extra Space vs. Metalrgica Riosulense SA | Extra Space vs. METISA Metalrgica Timboense | Extra Space vs. STAG Industrial, |
| American Airlines vs. Delta Air Lines | American Airlines vs. HCA Healthcare, | American Airlines vs. Liberty Broadband | American Airlines vs. Elevance Health, |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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