Correlation Between Extra Space and Global Net

Can any of the company-specific risk be diversified away by investing in both Extra Space and Global Net 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 Global Net 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 Global Net Lease, you can compare the effects of market volatilities on Extra Space and Global Net 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 Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extra Space and Global Net.

Diversification Opportunities for Extra Space and Global Net

0.09

Correlation Coefficient

Extra Space  Global Net

Significant diversification

The 3 months correlation between Extra and Global is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Extra Space i.e., Extra Space and Global Net go up and down completely randomly.

Pair Corralation between Extra Space and Global Net

Assuming the 90 days trading horizon Extra Space is expected to generate 13.62 times less return on investment than Global Net. But when comparing it to its historical volatility, Extra Space Storage is 1.22 times less risky than Global Net. It trades about 0.01 of its potential returns per unit of risk. Global Net Lease is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  686.00  in Global Net Lease on December 21, 2024 and sell it today you would earn a total of  104.00  from holding Global Net Lease or generate 15.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Extra Space Storage  vs.  Global Net Lease

Extra Space Storage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Extra Space Storage are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Extra Space is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Global Net Lease

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global Net unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and Global Net

The main advantage of trading using opposite Extra Space and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extra Space position performs unexpectedly, Global Net 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 Global Net will offset losses from the drop in Global Net's long position.

The idea behind Extra Space Storage and Global Net Lease 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.