Correlation Between Extra Space and Livetech

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

Diversification Opportunities for Extra Space and Livetech

0.6

Correlation Coefficient

Extra Space  Livetech

Poor diversification

The 3 months correlation between Extra and Livetech is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Livetech da Bahia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livetech da Bahia 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 Livetech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livetech da Bahia has no effect on the direction of Extra Space i.e., Extra Space and Livetech go up and down completely randomly.

Pair Corralation between Extra Space and Livetech

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Livetech. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.25 times less risky than Livetech. The stock trades about -0.06 of its potential returns per unit of risk. The Livetech da Bahia is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Livetech da Bahia on December 2, 2024 and sell it today you would lose (2.00) from holding Livetech da Bahia or give up 0.9% 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.  Livetech da Bahia

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.

Livetech da Bahia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Livetech da Bahia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Extra Space and Livetech

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

The idea behind Extra Space Storage and Livetech da Bahia 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.