Correlation Between Extra Space and SCOR PK

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

Diversification Opportunities for Extra Space and SCOR PK

0.04

Correlation Coefficient

Extra Space  SCOR PK

Significant diversification

The 3 months correlation between Extra and SCOR is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK 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 SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of Extra Space i.e., Extra Space and SCOR PK go up and down completely randomly.

Pair Corralation between Extra Space and SCOR PK

Considering the 90-day investment horizon Extra Space Storage is expected to under-perform the SCOR PK. But the stock apears to be less risky and, when comparing its historical volatility, Extra Space Storage is 2.3 times less risky than SCOR PK. The stock trades about -0.01 of its potential returns per unit of risk. The SCOR PK is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  241.00  in SCOR PK on December 27, 2024 and sell it today you would earn a total of  57.00  from holding SCOR PK or generate 23.65% return on investment over 90 days.

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

Extra Space Storage  vs.  SCOR PK

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. Even with relatively invariable basic indicators, Extra Space is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

SCOR PK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SCOR PK showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extra Space and SCOR PK

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

The idea behind Extra Space Storage and SCOR PK 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.