Correlation Between Extra Space and GP Investments
Can any of the company-specific risk be diversified away by investing in both Extra Space and GP Investments 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 GP Investments 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 GP Investments, you can compare the effects of market volatilities on Extra Space and GP Investments 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 GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and GP Investments.
Diversification Opportunities for Extra Space and GP Investments
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Extra and GPIV33 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Extra Space i.e., Extra Space and GP Investments go up and down completely randomly.
Pair Corralation between Extra Space and GP Investments
Assuming the 90 days trading horizon Extra Space is expected to generate 1.18 times less return on investment than GP Investments. But when comparing it to its historical volatility, Extra Space Storage is 1.11 times less risky than GP Investments. It trades about 0.03 of its potential returns per unit of risk. GP Investments is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 285.00 in GP Investments on August 30, 2024 and sell it today you would earn a total of 108.00 from holding GP Investments or generate 37.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 80.32% |
| Values | Daily Returns |
Extra Space Storage vs. GP Investments
Performance |
| Timeline |
| Extra Space Storage |
| GP Investments |
Extra Space and GP Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and GP Investments
The main advantage of trading using opposite Extra Space and GP Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, GP Investments 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 GP Investments will offset losses from the drop in GP Investments' long position.| Extra Space vs. BTG Pactual Logstica | Extra Space vs. Plano Plano Desenvolvimento | Extra Space vs. The Procter Gamble | Extra Space vs. Cable One |
| GP Investments vs. Global X Funds | GP Investments vs. American Airlines Group | GP Investments vs. Southwest Airlines Co | GP Investments vs. Unity Software |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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