Correlation Between Extra Space and KeyCorp

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

Diversification Opportunities for Extra Space and KeyCorp

0.68

Correlation Coefficient

Extra Space  KeyCorp

Poor diversification

The 3 months correlation between Extra and KeyCorp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Extra Space i.e., Extra Space and KeyCorp go up and down completely randomly.

Pair Corralation between Extra Space and KeyCorp

Assuming the 90 days trading horizon Extra Space Storage is expected to generate 1.96 times more return on investment than KeyCorp. However, Extra Space is 1.96 times more volatile than KeyCorp. It trades about -0.11 of its potential returns per unit of risk. KeyCorp is currently generating about -0.23 per unit of risk. If you would invest  26,806  in Extra Space Storage on December 2, 2024 and sell it today you would lose (4,300) from holding Extra Space Storage or give up 16.04% of portfolio value over 90 days.

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

Extra Space Storage  vs.  KeyCorp

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.

KeyCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days KeyCorp 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 technical and fundamental 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.

Pair Trading with Extra Space and KeyCorp

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

The idea behind Extra Space Storage and KeyCorp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.