Correlation Between Extra Space and Integrated Diagnostics

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

Diversification Opportunities for Extra Space and Integrated Diagnostics

-0.36

Correlation Coefficient

Extra Space  Integrated Diagnostics

Very good diversification

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

Pair Corralation between Extra Space and Integrated Diagnostics

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Integrated Diagnostics. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 2.16 times less risky than Integrated Diagnostics. The stock trades about -0.11 of its potential returns per unit of risk. The Integrated Diagnostics Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Integrated Diagnostics Holdings on October 8, 2024 and sell it today you would earn a total of  5.00  from holding Integrated Diagnostics Holdings or generate 12.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Extra Space Storage  vs.  Integrated Diagnostics Holding

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Integrated Diagnostics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Diagnostics Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Integrated Diagnostics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and Integrated Diagnostics

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

The idea behind Extra Space Storage and Integrated Diagnostics Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.