Correlation Between Extra Space and Molson Coors

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

Diversification Opportunities for Extra Space and Molson Coors

-0.36

Correlation Coefficient

Extra Space  Molson Coors

Very good diversification

The 3 months correlation between Extra and Molson is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Extra Space i.e., Extra Space and Molson Coors go up and down completely randomly.

Pair Corralation between Extra Space and Molson Coors

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Molson Coors. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.04 times less risky than Molson Coors. The stock trades about -0.01 of its potential returns per unit of risk. The Molson Coors Beverage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,672  in Molson Coors Beverage on September 3, 2024 and sell it today you would earn a total of  547.00  from holding Molson Coors Beverage or generate 9.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Extra Space Storage  vs.  Molson Coors Beverage

Extra Space Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Extra Space Storage has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Molson Coors Beverage

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Extra Space and Molson Coors

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

The idea behind Extra Space Storage and Molson Coors Beverage 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.