Correlation Between Crown Castle and Extra Space

Can any of the company-specific risk be diversified away by investing in both Crown Castle and Extra Space 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 Crown Castle and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crown Castle and Extra Space Storage, you can compare the effects of market volatilities on Crown Castle and Extra Space 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 Crown Castle with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Castle and Extra Space.

Diversification Opportunities for Crown Castle and Extra Space

0.88

Correlation Coefficient

Crown Castle  Extra Space

Very poor diversification

The 3 months correlation between Crown and Extra is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Crown Castle and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and Crown Castle 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 Crown Castle are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Crown Castle i.e., Crown Castle and Extra Space go up and down completely randomly.

Pair Corralation between Crown Castle and Extra Space

Considering the 90-day investment horizon Crown Castle is expected to under-perform the Extra Space. In addition to that, Crown Castle is 1.52 times more volatile than Extra Space Storage. It trades about -0.08 of its total potential returns per unit of risk. Extra Space Storage is currently generating about 0.1 per unit of volatility. If you would invest  15,191  in Extra Space Storage on November 19, 2024 and sell it today you would earn a total of  301.00  from holding Extra Space Storage or generate 1.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Crown Castle  vs.  Extra Space Storage

Crown Castle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crown Castle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Extra Space Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Extra Space Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Extra Space is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Crown Castle and Extra Space

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

The idea behind Crown Castle and Extra Space Storage 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.