Correlation Between Initio and National Storage

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

By analyzing existing cross correlation between Initio Inc and National Storage REIT, you can compare the effects of market volatilities on Initio and National Storage 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 Initio with a short position of National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Initio and National Storage.

Diversification Opportunities for Initio and National Storage

0.48

Correlation Coefficient

Initio  National Storage

Very weak diversification

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

Pair Corralation between Initio and National Storage

Given the investment horizon of 90 days Initio Inc is expected to under-perform the National Storage. In addition to that, Initio is 3.19 times more volatile than National Storage REIT. It trades about -0.17 of its total potential returns per unit of risk. National Storage REIT is currently generating about -0.09 per unit of volatility. If you would invest  142.00  in National Storage REIT on December 21, 2024 and sell it today you would lose (10.00) from holding National Storage REIT or give up 7.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Initio Inc  vs.  National Storage REIT

Initio Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Initio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

National Storage REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Storage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Initio and National Storage

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

The idea behind Initio Inc and National Storage REIT 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.