Correlation Between Consolidated Communications and National Storage
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications and National Storage 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 Consolidated Communications and National Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and National Storage Affiliates, you can compare the effects of market volatilities on Consolidated Communications and National Storage 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 Consolidated Communications with a short position of National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and National Storage.
Diversification Opportunities for Consolidated Communications and National Storage
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Consolidated and National is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and National Storage go up and down completely randomly.
Pair Corralation between Consolidated Communications and National Storage
Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 0.43 times more return on investment than National Storage. However, Consolidated Communications Holdings is 2.31 times less risky than National Storage. It trades about 0.16 of its potential returns per unit of risk. National Storage Affiliates is currently generating about -0.01 per unit of risk. If you would invest 412.00 in Consolidated Communications Holdings on September 12, 2024 and sell it today you would earn a total of 32.00 from holding Consolidated Communications Holdings or generate 7.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Consolidated Communications Ho vs. National Storage Affiliates
Performance |
Timeline |
Consolidated Communications |
National Storage Aff |
Consolidated Communications and National Storage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Consolidated Communications and National Storage
The main advantage of trading using opposite Consolidated Communications and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.The idea behind Consolidated Communications Holdings and National Storage Affiliates 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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