Correlation Between Extra Space and DR Horton
Can any of the company-specific risk be diversified away by investing in both Extra Space and DR Horton 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 DR Horton 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 DR Horton, you can compare the effects of market volatilities on Extra Space and DR Horton 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 DR Horton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and DR Horton.
Diversification Opportunities for Extra Space and DR Horton
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Extra and D1HI34 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton 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 DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Extra Space i.e., Extra Space and DR Horton go up and down completely randomly.
Pair Corralation between Extra Space and DR Horton
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.55 times more return on investment than DR Horton. However, Extra Space is 1.55 times more volatile than DR Horton. It trades about 0.14 of its potential returns per unit of risk. DR Horton is currently generating about 0.19 per unit of risk. If you would invest 23,680 in Extra Space Storage on August 30, 2024 and sell it today you would earn a total of 1,895 from holding Extra Space Storage or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Extra Space Storage vs. DR Horton
Performance |
| Timeline |
| Extra Space Storage |
| DR Horton |
Extra Space and DR Horton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and DR Horton
The main advantage of trading using opposite Extra Space and DR Horton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, DR Horton 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 DR Horton will offset losses from the drop in DR Horton's long position.| Extra Space vs. Mitsubishi UFJ Financial | Extra Space vs. United Rentals | Extra Space vs. Zoom Video Communications | Extra Space vs. Cognizant Technology Solutions |
| DR Horton vs. GP Investments | DR Horton vs. Metalrgica Riosulense SA | DR Horton vs. Extra Space Storage | DR Horton vs. United Airlines Holdings |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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