Correlation Between National Storage and Xero
Can any of the company-specific risk be diversified away by investing in both National Storage and Xero 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 National Storage and Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Storage REIT and Xero, you can compare the effects of market volatilities on National Storage and Xero 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 National Storage with a short position of Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Storage and Xero.
Diversification Opportunities for National Storage and Xero
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and Xero is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and National Storage 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 National Storage REIT are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of National Storage i.e., National Storage and Xero go up and down completely randomly.
Pair Corralation between National Storage and Xero
Assuming the 90 days trading horizon National Storage is expected to generate 6.99 times less return on investment than Xero. But when comparing it to its historical volatility, National Storage REIT is 1.73 times less risky than Xero. It trades about 0.1 of its potential returns per unit of risk. Xero is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 15,115 in Xero on August 28, 2024 and sell it today you would earn a total of 2,335 from holding Xero or generate 15.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Storage REIT vs. Xero
Performance |
| Timeline |
| National Storage REIT |
| Xero |
National Storage and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Storage and Xero
The main advantage of trading using opposite National Storage and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.| National Storage vs. Scentre Group | National Storage vs. Vicinity Centres Re | National Storage vs. Charter Hall Retail | National Storage vs. Cromwell Property Group |
| Xero vs. Bailador Technology Invest | Xero vs. Autosports Group | Xero vs. Infomedia | Xero vs. National Storage 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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