Correlation Between Extra Space and NRG Energy,

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

Diversification Opportunities for Extra Space and NRG Energy,

0.15

Correlation Coefficient

Extra Space  NRG Energy,

Average diversification

The 3 months correlation between Extra and NRG is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and NRG Energy, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy, 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 NRG Energy,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy, has no effect on the direction of Extra Space i.e., Extra Space and NRG Energy, go up and down completely randomly.

Pair Corralation between Extra Space and NRG Energy,

Assuming the 90 days trading horizon Extra Space is expected to generate 2.87 times less return on investment than NRG Energy,. But when comparing it to its historical volatility, Extra Space Storage is 1.05 times less risky than NRG Energy,. It trades about 0.06 of its potential returns per unit of risk. NRG Energy, is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  25,837  in NRG Energy, on October 24, 2024 and sell it today you would earn a total of  38,483  from holding NRG Energy, or generate 148.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.67%
Values	Daily Returns

Extra Space Storage  vs.  NRG Energy,

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 newest stock price disturbance, may contribute to short-term losses for the investors.

NRG Energy,

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy, are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NRG Energy, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and NRG Energy,

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

The idea behind Extra Space Storage and NRG Energy, 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.