Correlation Between Mitsubishi Gas and Extra Space

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

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

Diversification Opportunities for Mitsubishi Gas and Extra Space

0.35

Correlation Coefficient

Mitsubishi Gas  Extra Space

Weak diversification

The 3 months correlation between Mitsubishi and Extra is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Gas Chemical 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 Mitsubishi Gas 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 Mitsubishi Gas Chemical 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 Mitsubishi Gas i.e., Mitsubishi Gas and Extra Space go up and down completely randomly.

Pair Corralation between Mitsubishi Gas and Extra Space

Assuming the 90 days trading horizon Mitsubishi Gas Chemical is expected to under-perform the Extra Space. In addition to that, Mitsubishi Gas is 1.1 times more volatile than Extra Space Storage. It trades about -0.2 of its total potential returns per unit of risk. Extra Space Storage is currently generating about -0.09 per unit of volatility. If you would invest  15,867  in Extra Space Storage on November 29, 2024 and sell it today you would lose (1,252) from holding Extra Space Storage or give up 7.89% of portfolio value over 90 days.

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

Mitsubishi Gas Chemical  vs.  Extra Space Storage

Mitsubishi Gas Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Gas Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. Despite latest fragile 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.

Pair Trading with Mitsubishi Gas and Extra Space

The main advantage of trading using opposite Mitsubishi Gas and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Gas 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 Mitsubishi Gas Chemical 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.