Correlation Between CubeSmart and Extra Space

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

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

Diversification Opportunities for CubeSmart and Extra Space

0.52

Correlation Coefficient

CubeSmart  Extra Space

Very weak diversification

The 3 months correlation between CubeSmart and Extra is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CubeSmart 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 CubeSmart 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 CubeSmart 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 CubeSmart i.e., CubeSmart and Extra Space go up and down completely randomly.

Pair Corralation between CubeSmart and Extra Space

Given the investment horizon of 90 days CubeSmart is expected to generate 0.99 times more return on investment than Extra Space. However, CubeSmart is 1.01 times less risky than Extra Space. It trades about 0.01 of its potential returns per unit of risk. Extra Space Storage is currently generating about 0.01 per unit of risk. If you would invest  4,183  in CubeSmart on December 29, 2024 and sell it today you would earn a total of  23.00  from holding CubeSmart or generate 0.55% return on investment over 90 days.

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

CubeSmart  vs.  Extra Space Storage

CubeSmart

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CubeSmart are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, CubeSmart is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 CubeSmart and Extra Space

The main advantage of trading using opposite CubeSmart and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CubeSmart 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 CubeSmart 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.