Correlation Between Extra Space and Air Products

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

Diversification Opportunities for Extra Space and Air Products

0.44

Correlation Coefficient

Extra Space  Air Products

Very weak diversification

The 3 months correlation between Extra and Air is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Extra Space i.e., Extra Space and Air Products go up and down completely randomly.

Pair Corralation between Extra Space and Air Products

Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.53 times more return on investment than Air Products. However, Extra Space is 1.53 times more volatile than Air Products and. It trades about 0.04 of its potential returns per unit of risk. Air Products and is currently generating about 0.0 per unit of risk. If you would invest  23,345  in Extra Space Storage on October 8, 2024 and sell it today you would earn a total of  655.00  from holding Extra Space Storage or generate 2.81% return on investment over 90 days.

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

Extra Space Storage  vs.  Air Products and

Extra Space Storage

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Extra Space Storage are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Extra Space is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Air Products

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Products sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and Air Products

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

The idea behind Extra Space Storage and Air Products and 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.