Correlation Between Extra Space and Unity Software

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

Diversification Opportunities for Extra Space and Unity Software

0.42

Correlation Coefficient

Extra Space  Unity Software

Very weak diversification

The 3 months correlation between Extra and Unity is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software 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 Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of Extra Space i.e., Extra Space and Unity Software go up and down completely randomly.

Pair Corralation between Extra Space and Unity Software

Assuming the 90 days trading horizon Extra Space Storage is expected to under-perform the Unity Software. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 1.59 times less risky than Unity Software. The stock trades about -0.01 of its potential returns per unit of risk. The Unity Software is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  533.00  in Unity Software on September 12, 2024 and sell it today you would earn a total of  257.00  from holding Unity Software or generate 48.22% return on investment over 90 days.

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

Extra Space Storage  vs.  Unity Software

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.

Unity Software

Risk-Adjusted Performance

13 of 100

Solid

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

Pair Trading with Extra Space and Unity Software

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

The idea behind Extra Space Storage and Unity Software 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.