Correlation Between Extra Space and Lennar
Can any of the company-specific risk be diversified away by investing in both Extra Space and Lennar 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 Lennar 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 Lennar, you can compare the effects of market volatilities on Extra Space and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Lennar.
Diversification Opportunities for Extra Space and Lennar
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Extra and Lennar is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Extra Space i.e., Extra Space and Lennar go up and down completely randomly.
Pair Corralation between Extra Space and Lennar
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.45 times more return on investment than Lennar. However, Extra Space is 1.45 times more volatile than Lennar. It trades about 0.08 of its potential returns per unit of risk. Lennar is currently generating about -0.02 per unit of risk. If you would invest 23,680 in Extra Space Storage on August 26, 2024 and sell it today you would earn a total of 872.00 from holding Extra Space Storage or generate 3.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. Lennar
Performance |
| Timeline |
| Extra Space Storage |
| Lennar |
Extra Space and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Lennar
The main advantage of trading using opposite Extra Space and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| Extra Space vs. BTG Pactual Logstica | Extra Space vs. Fras le SA | Extra Space vs. Clave Indices De | Extra Space vs. Telefonaktiebolaget LM Ericsson |
| Lennar vs. Electronic Arts | Lennar vs. Take Two Interactive Software | Lennar vs. Brpr Corporate Offices | Lennar vs. Extra Space Storage |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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