Correlation Between United Rentals and Extra Space
Can any of the company-specific risk be diversified away by investing in both United Rentals 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 United Rentals and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Extra Space Storage, you can compare the effects of market volatilities on United Rentals 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 United Rentals with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Extra Space.
Diversification Opportunities for United Rentals and Extra Space
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Extra is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals 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 United Rentals 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 United Rentals 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 United Rentals i.e., United Rentals and Extra Space go up and down completely randomly.
Pair Corralation between United Rentals and Extra Space
Assuming the 90 days trading horizon United Rentals is expected to generate 1.13 times more return on investment than Extra Space. However, United Rentals is 1.13 times more volatile than Extra Space Storage. It trades about 0.14 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.05 per unit of risk. If you would invest 15,579 in United Rentals on August 30, 2024 and sell it today you would earn a total of 2,613 from holding United Rentals or generate 16.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Extra Space Storage
Performance |
| Timeline |
| United Rentals |
| Extra Space Storage |
United Rentals and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Extra Space
The main advantage of trading using opposite United Rentals and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals 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 United Rentals 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. Mitsubishi UFJ Financial | Extra Space vs. United Rentals | Extra Space vs. Zoom Video Communications | Extra Space vs. Cognizant Technology Solutions |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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