Correlation Between Extra Space and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Extra Space and Booking Holdings 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 Booking Holdings 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 Booking Holdings, you can compare the effects of market volatilities on Extra Space and Booking Holdings 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Booking Holdings.
Diversification Opportunities for Extra Space and Booking Holdings
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Extra and Booking is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Extra Space i.e., Extra Space and Booking Holdings go up and down completely randomly.
Pair Corralation between Extra Space and Booking Holdings
Assuming the 90 days trading horizon Extra Space is expected to generate 2.47 times less return on investment than Booking Holdings. In addition to that, Extra Space is 1.33 times more volatile than Booking Holdings. It trades about 0.04 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.12 per unit of volatility. If you would invest 6,190 in Booking Holdings on September 3, 2024 and sell it today you would earn a total of 11,415 from holding Booking Holdings or generate 184.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.56% |
| Values | Daily Returns |
Extra Space Storage vs. Booking Holdings
Performance |
| Timeline |
| Extra Space Storage |
| Booking Holdings |
Extra Space and Booking Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Booking Holdings
The main advantage of trading using opposite Extra Space and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Booking Holdings 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 Booking Holdings will offset losses from the drop in Booking Holdings' long position.| Extra Space vs. Marvell Technology | Extra Space vs. Align Technology | Extra Space vs. Take Two Interactive Software | Extra Space vs. Bio Techne |
| Booking Holdings vs. Spotify Technology SA | Booking Holdings vs. Extra Space Storage | Booking Holdings vs. Electronic Arts | Booking Holdings vs. Metalurgica Gerdau SA |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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