Correlation Between Extra Space and Natura Co
Can any of the company-specific risk be diversified away by investing in both Extra Space and Natura Co 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 Natura Co 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 Natura Co Holding, you can compare the effects of market volatilities on Extra Space and Natura Co 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 Natura Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Natura Co.
Diversification Opportunities for Extra Space and Natura Co
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Extra and Natura is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Natura Co Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natura Co Holding 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 Natura Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natura Co Holding has no effect on the direction of Extra Space i.e., Extra Space and Natura Co go up and down completely randomly.
Pair Corralation between Extra Space and Natura Co
Assuming the 90 days trading horizon Extra Space is expected to generate 1.23 times less return on investment than Natura Co. But when comparing it to its historical volatility, Extra Space Storage is 1.08 times less risky than Natura Co. It trades about 0.04 of its potential returns per unit of risk. Natura Co Holding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,311 in Natura Co Holding on September 2, 2024 and sell it today you would earn a total of 77.00 from holding Natura Co Holding or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. Natura Co Holding
Performance |
| Timeline |
| Extra Space Storage |
| Natura Co Holding |
Extra Space and Natura Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Natura Co
The main advantage of trading using opposite Extra Space and Natura Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Natura Co 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 Natura Co will offset losses from the drop in Natura Co's long position.| Extra Space vs. BTG Pactual Logstica | Extra Space vs. Fras le SA | Extra Space vs. Western Digital | Extra Space vs. Energisa SA |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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