Correlation Between Target Healthcare and Extra Space
Can any of the company-specific risk be diversified away by investing in both Target Healthcare 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 Target Healthcare and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Healthcare REIT and Extra Space Storage, you can compare the effects of market volatilities on Target Healthcare 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 Target Healthcare with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Healthcare and Extra Space.
Diversification Opportunities for Target Healthcare and Extra Space
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Target and Extra is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT 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 Target Healthcare 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 Target Healthcare REIT 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 Target Healthcare i.e., Target Healthcare and Extra Space go up and down completely randomly.
Pair Corralation between Target Healthcare and Extra Space
Assuming the 90 days trading horizon Target Healthcare is expected to generate 2.61 times less return on investment than Extra Space. But when comparing it to its historical volatility, Target Healthcare REIT is 1.12 times less risky than Extra Space. It trades about 0.03 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 13,213 in Extra Space Storage on September 3, 2024 and sell it today you would earn a total of 4,012 from holding Extra Space Storage or generate 30.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Target Healthcare REIT vs. Extra Space Storage
Performance |
| Timeline |
| Target Healthcare REIT |
| Extra Space Storage |
Target Healthcare and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Healthcare and Extra Space
The main advantage of trading using opposite Target Healthcare and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Healthcare 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.| Target Healthcare vs. Made Tech Group | Target Healthcare vs. Allianz Technology Trust | Target Healthcare vs. AIM ImmunoTech | Target Healthcare vs. TechnipFMC PLC |
| Extra Space vs. Gaztransport et Technigaz | Extra Space vs. Summit Materials Cl | Extra Space vs. DFS Furniture PLC | Extra Space vs. Fevertree Drinks Plc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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