Correlation Between Extra Space and Western Digital
Can any of the company-specific risk be diversified away by investing in both Extra Space and Western Digital 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 Western Digital 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 Western Digital, you can compare the effects of market volatilities on Extra Space and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Western Digital.
Diversification Opportunities for Extra Space and Western Digital
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Extra and Western is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Extra Space i.e., Extra Space and Western Digital go up and down completely randomly.
Pair Corralation between Extra Space and Western Digital
Assuming the 90 days trading horizon Extra Space is expected to generate 1.46 times less return on investment than Western Digital. But when comparing it to its historical volatility, Extra Space Storage is 1.36 times less risky than Western Digital. It trades about 0.09 of its potential returns per unit of risk. Western Digital is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 38,114 in Western Digital on September 13, 2024 and sell it today you would earn a total of 2,610 from holding Western Digital or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Extra Space Storage vs. Western Digital
Performance |
| Timeline |
| Extra Space Storage |
| Western Digital |
Extra Space and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and Western Digital
The main advantage of trading using opposite Extra Space and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's 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 |
| Western Digital vs. Arista Networks | Western Digital vs. Dell Technologies | Western Digital vs. Fundo Investimento Imobiliario | Western Digital vs. LESTE FDO INV |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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