Correlation Between Extra Space and Brookfield

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

Diversification Opportunities for Extra Space and Brookfield

0.13

Correlation Coefficient

Extra Space  Brookfield

Average diversification

The 3 months correlation between Extra and Brookfield is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Extra Space i.e., Extra Space and Brookfield go up and down completely randomly.

Pair Corralation between Extra Space and Brookfield

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Brookfield. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.3 times less risky than Brookfield. The stock trades about -0.13 of its potential returns per unit of risk. The Brookfield is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  8,922  in Brookfield on December 26, 2024 and sell it today you would lose (1,025) from holding Brookfield or give up 11.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Extra Space Storage  vs.  Brookfield

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Brookfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Extra Space and Brookfield

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

The idea behind Extra Space Storage and Brookfield 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.