Correlation Between Extra Space and Air Products
Can any of the company-specific risk be diversified away by investing in both Extra Space and Air Products 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 Extra Space and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extra Space Storage and Air Products Chemicals, you can compare the effects of market volatilities on Extra Space and Air Products 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 Extra Space with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Air Products.
Diversification Opportunities for Extra Space and Air Products
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extra and Air is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals and Extra 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 Extra Space Storage are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Extra Space i.e., Extra Space and Air Products go up and down completely randomly.
Pair Corralation between Extra Space and Air Products
Assuming the 90 days trading horizon Extra Space is expected to generate 5.69 times less return on investment than Air Products. But when comparing it to its historical volatility, Extra Space Storage is 3.02 times less risky than Air Products. It trades about 0.02 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 26,388 in Air Products Chemicals on December 4, 2024 and sell it today you would earn a total of 4,943 from holding Air Products Chemicals or generate 18.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.77% |
Values | Daily Returns |
Extra Space Storage vs. Air Products Chemicals
Performance |
Timeline |
Extra Space Storage |
Air Products Chemicals |
Extra Space and Air Products Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Extra Space and Air Products
The main advantage of trading using opposite Extra Space and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.Extra Space vs. Invesco Physical Silver | Extra Space vs. Pan American Silver | Extra Space vs. Coeur Mining | Extra Space vs. Verizon Communications |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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