Correlation Between Extra Space and Constellation Software

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

Diversification Opportunities for Extra Space and Constellation Software

0.22

Correlation Coefficient

Extra Space  Constellation Software

Modest diversification

The 3 months correlation between Extra and Constellation is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Extra Space Storage and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Extra Space i.e., Extra Space and Constellation Software go up and down completely randomly.

Pair Corralation between Extra Space and Constellation Software

Assuming the 90 days horizon Extra Space Storage is expected to generate 0.91 times more return on investment than Constellation Software. However, Extra Space Storage is 1.1 times less risky than Constellation Software. It trades about -0.15 of its potential returns per unit of risk. Constellation Software is currently generating about -0.35 per unit of risk. If you would invest  14,967  in Extra Space Storage on October 11, 2024 and sell it today you would lose (667.00) from holding Extra Space Storage or give up 4.46% of portfolio value over 90 days.

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

Extra Space Storage  vs.  Constellation 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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Constellation Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Constellation Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Extra Space and Constellation Software

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

The idea behind Extra Space Storage and Constellation 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.