Correlation Between Extra Space and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Extra Space and Basic Materials 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 Basic Materials 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 Basic Materials, you can compare the effects of market volatilities on Extra Space and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Basic Materials.
Diversification Opportunities for Extra Space and Basic Materials
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Extra and Basic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Extra Space i.e., Extra Space and Basic Materials go up and down completely randomly.
Pair Corralation between Extra Space and Basic Materials
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 2.14 times more return on investment than Basic Materials. However, Extra Space is 2.14 times more volatile than Basic Materials. It trades about 0.15 of its potential returns per unit of risk. Basic Materials is currently generating about 0.03 per unit of risk. If you would invest 12,580 in Extra Space Storage on September 19, 2024 and sell it today you would earn a total of 11,868 from holding Extra Space Storage or generate 94.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 73.1% |
| Values | Daily Returns |
Extra Space Storage vs. Basic Materials
Performance |
| Timeline |
Extra Space and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Extra Space Storage
Pair trading matchups for Extra Space
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with Extra Space and Basic Materials
The main advantage of trading using opposite Extra Space and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Extra Space vs. Cognizant Technology Solutions | Extra Space vs. Zoom Video Communications | Extra Space vs. salesforce inc | Extra Space vs. Micron Technology |
| Basic Materials vs. Multilaser Industrial SA | Basic Materials vs. Marvell Technology | Basic Materials vs. Micron Technology | Basic Materials vs. Waste Management |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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