Correlation Between Extra Space and Clover Health

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

Diversification Opportunities for Extra Space and Clover Health

-0.31

Correlation Coefficient

Extra Space  Clover Health

Very good diversification

The 3 months correlation between Extra and Clover is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Clover Health Investments, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clover Health Invest 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 Clover Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clover Health Invest has no effect on the direction of Extra Space i.e., Extra Space and Clover Health go up and down completely randomly.

Pair Corralation between Extra Space and Clover Health

Assuming the 90 days trading horizon Extra Space is expected to generate 103.5 times less return on investment than Clover Health. But when comparing it to its historical volatility, Extra Space Storage is 1.13 times less risky than Clover Health. It trades about 0.01 of its potential returns per unit of risk. Clover Health Investments, is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  2,004  in Clover Health Investments, on October 22, 2024 and sell it today you would earn a total of  488.00  from holding Clover Health Investments, or generate 24.35% return on investment over 90 days.

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

Extra Space Storage  vs.  Clover Health Investments,

Extra Space Storage

Risk-Adjusted Performance

0 of 100

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 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.

Clover Health Invest

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and Clover Health

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

The idea behind Extra Space Storage and Clover Health Investments, 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.