Correlation Between National Storage and Ironbark Capital

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

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

Diversification Opportunities for National Storage and Ironbark Capital

0.1

Correlation Coefficient

National Storage  Ironbark Capital

Average diversification

The 3 months correlation between National and Ironbark is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding National Storage REIT and Ironbark Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironbark Capital and National Storage 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 National Storage REIT are associated (or correlated) with Ironbark Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironbark Capital has no effect on the direction of National Storage i.e., National Storage and Ironbark Capital go up and down completely randomly.

Pair Corralation between National Storage and Ironbark Capital

Assuming the 90 days trading horizon National Storage REIT is expected to generate 0.98 times more return on investment than Ironbark Capital. However, National Storage REIT is 1.02 times less risky than Ironbark Capital. It trades about 0.05 of its potential returns per unit of risk. Ironbark Capital is currently generating about 0.01 per unit of risk. If you would invest  208.00  in National Storage REIT on September 26, 2024 and sell it today you would earn a total of  36.00  from holding National Storage REIT or generate 17.31% return on investment over 90 days.

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

National Storage REIT  vs.  Ironbark Capital

National Storage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ironbark Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ironbark Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Ironbark Capital 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 National Storage and Ironbark Capital

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

The idea behind National Storage REIT and Ironbark Capital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.