Correlation Between National Storage and Park Ohio

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

Diversification Opportunities for National Storage and Park Ohio

0.22

Correlation Coefficient

National Storage  Park Ohio

Modest diversification

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

Pair Corralation between National Storage and Park Ohio

Assuming the 90 days horizon National Storage REIT is expected to generate 1.37 times more return on investment than Park Ohio. However, National Storage is 1.37 times more volatile than Park Ohio Holdings. It trades about -0.23 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about -0.51 per unit of risk. If you would invest  166.00  in National Storage REIT on October 8, 2024 and sell it today you would lose (21.00) from holding National Storage REIT or give up 12.65% of portfolio value over 90 days.

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

National Storage REIT  vs.  Park Ohio Holdings

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. 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.

Park Ohio Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Ohio Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with National Storage and Park Ohio

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

The idea behind National Storage REIT and Park Ohio Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.