Correlation Between Iron Mountain and Extra Space

Can any of the company-specific risk be diversified away by investing in both Iron Mountain and Extra Space 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 Iron Mountain and Extra Space into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iron Mountain Incorporated and Extra Space Storage, you can compare the effects of market volatilities on Iron Mountain and Extra Space 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 Iron Mountain with a short position of Extra Space. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Mountain and Extra Space.

Diversification Opportunities for Iron Mountain and Extra Space

0.24

Correlation Coefficient

Iron Mountain  Extra Space

Modest diversification

The 3 months correlation between Iron and Extra is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and Extra Space Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extra Space Storage and Iron Mountain 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 Iron Mountain Incorporated are associated (or correlated) with Extra Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extra Space Storage has no effect on the direction of Iron Mountain i.e., Iron Mountain and Extra Space go up and down completely randomly.

Pair Corralation between Iron Mountain and Extra Space

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to generate 0.66 times more return on investment than Extra Space. However, Iron Mountain Incorporated is 1.52 times less risky than Extra Space. It trades about -0.16 of its potential returns per unit of risk. Extra Space Storage is currently generating about -0.11 per unit of risk. If you would invest  69,006  in Iron Mountain Incorporated on September 24, 2024 and sell it today you would lose (4,746) from holding Iron Mountain Incorporated or give up 6.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Iron Mountain Incorporated  vs.  Extra Space Storage

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Iron Mountain and Extra Space

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

The idea behind Iron Mountain Incorporated and Extra Space Storage 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..