Correlation Between SPACE and Extra Space
Can any of the company-specific risk be diversified away by investing in both SPACE and Extra Space 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 SPACE and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPACE and Extra Space Storage, you can compare the effects of market volatilities on SPACE and Extra Space 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 SPACE with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Extra Space.
Diversification Opportunities for SPACE and Extra Space
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPACE and Extra is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and 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 SPACE are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of SPACE i.e., SPACE and Extra Space go up and down completely randomly.
Pair Corralation between SPACE and Extra Space
Assuming the 90 days horizon SPACE is expected to generate 82.81 times more return on investment than Extra Space. However, SPACE is 82.81 times more volatile than Extra Space Storage. It trades about 0.16 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.04 per unit of risk. If you would invest 2.63 in SPACE on September 4, 2024 and sell it today you would earn a total of 56.37 from holding SPACE or generate 2143.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 47.72% |
| Values | Daily Returns |
SPACE vs. Extra Space Storage
Performance |
| Timeline |
| SPACE |
| Extra Space Storage |
SPACE and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPACE and Extra Space
The main advantage of trading using opposite SPACE and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE position performs unexpectedly, Extra Space 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 Extra Space will offset losses from the drop in Extra Space's long position.The idea behind SPACE and Extra Space Storage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Extra Space vs. Prologis | Extra Space vs. EastGroup Properties | Extra Space vs. Rexford Industrial Realty | Extra Space vs. Plymouth Industrial REIT |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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