Correlation Between United Utilities and Extra Space
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 Utilities 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 Utilities Group and Extra Space Storage, you can compare the effects of market volatilities on United Utilities 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 Utilities with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Extra Space.
Diversification Opportunities for United Utilities and Extra Space
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Extra is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group 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 Utilities 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 Utilities Group 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 Utilities i.e., United Utilities and Extra Space go up and down completely randomly.
Pair Corralation between United Utilities and Extra Space
Assuming the 90 days trading horizon United Utilities is expected to generate 2.59 times less return on investment than Extra Space. But when comparing it to its historical volatility, United Utilities Group is 1.17 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 13,035 in Extra Space Storage on August 29, 2024 and sell it today you would earn a total of 4,002 from holding Extra Space Storage or generate 30.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
United Utilities Group vs. Extra Space Storage
Performance |
| Timeline |
| United Utilities |
| Extra Space Storage |
United Utilities and Extra Space Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Extra Space
The main advantage of trading using opposite United Utilities and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. Greenroc Mining PLC | United Utilities vs. Lundin Mining Corp | United Utilities vs. Thor Mining PLC | United Utilities vs. Silvercorp Metals |
| Extra Space vs. Lendinvest PLC | Extra Space vs. Neometals | Extra Space vs. Coor Service Management | Extra Space vs. Albion Technology General |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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