Correlation Between Extra Space and National Storage
Can any of the company-specific risk be diversified away by investing in both Extra Space and National Storage 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 National Storage 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 National Storage Affiliates, you can compare the effects of market volatilities on Extra Space and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and National Storage.
Diversification Opportunities for Extra Space and National Storage
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extra and National is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of Extra Space i.e., Extra Space and National Storage go up and down completely randomly.
Pair Corralation between Extra Space and National Storage
Assuming the 90 days horizon Extra Space is expected to generate 1.35 times less return on investment than National Storage. But when comparing it to its historical volatility, Extra Space Storage is 1.53 times less risky than National Storage. It trades about 0.2 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,956 in National Storage Affiliates on August 28, 2024 and sell it today you would earn a total of 322.00 from holding National Storage Affiliates or generate 8.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extra Space Storage vs. National Storage Affiliates
Performance |
| Timeline |
| Extra Space Storage |
| National Storage Aff |
Extra Space and National Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extra Space and National Storage
The main advantage of trading using opposite Extra Space and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.| Extra Space vs. CPU SOFTWAREHOUSE | Extra Space vs. VITEC SOFTWARE GROUP | Extra Space vs. Xinhua Winshare Publishing | Extra Space vs. Laureate Education |
| National Storage vs. Superior Plus Corp | National Storage vs. Origin Agritech | National Storage vs. Identiv | National Storage vs. INTUITIVE SURGICAL |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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