Correlation Between Extra Space and United Rentals
Can any of the company-specific risk be diversified away by investing in both Extra Space and United Rentals 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 United Rentals 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 United Rentals, you can compare the effects of market volatilities on Extra Space and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and United Rentals.
Diversification Opportunities for Extra Space and United Rentals
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Extra and United is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Extra Space i.e., Extra Space and United Rentals go up and down completely randomly.
Pair Corralation between Extra Space and United Rentals
Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.73 times more return on investment than United Rentals. However, Extra Space is 1.73 times more volatile than United Rentals. It trades about 0.06 of its potential returns per unit of risk. United Rentals is currently generating about -0.1 per unit of risk. If you would invest 23,736 in Extra Space Storage on September 15, 2024 and sell it today you would earn a total of 712.00 from holding Extra Space Storage or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
Extra Space Storage vs. United Rentals
Performance |
| Timeline |
| Extra Space Storage |
| United Rentals |
Extra Space and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and United Rentals
The main advantage of trading using opposite Extra Space and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.| Extra Space vs. BTG Pactual Logstica | Extra Space vs. Fundo Investimento Imobiliario | Extra Space vs. LESTE FDO INV | Extra Space vs. Fras le 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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