Correlation Between Extra Space and Prologis

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

Diversification Opportunities for Extra Space and Prologis

0.48

Correlation Coefficient

Extra Space  Prologis

Very weak diversification

The 3 months correlation between Extra and Prologis is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Prologis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prologis 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 Prologis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prologis has no effect on the direction of Extra Space i.e., Extra Space and Prologis go up and down completely randomly.

Pair Corralation between Extra Space and Prologis

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Prologis. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.01 times less risky than Prologis. The stock trades about -0.16 of its potential returns per unit of risk. The Prologis is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  5,550  in Prologis on October 15, 2024 and sell it today you would lose (296.00) from holding Prologis or give up 5.33% of portfolio value over 90 days.

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

Extra Space Storage  vs.  Prologis

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.

Prologis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prologis 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 essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Extra Space and Prologis

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

The idea behind Extra Space Storage and Prologis 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..