Correlation Between PUBLIC STORAGE and Arista Networks

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

By analyzing existing cross correlation between PUBLIC STORAGE PRFO and Arista Networks, you can compare the effects of market volatilities on PUBLIC STORAGE and Arista Networks 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 PUBLIC STORAGE with a short position of Arista Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of PUBLIC STORAGE and Arista Networks.

Diversification Opportunities for PUBLIC STORAGE and Arista Networks

-0.72

Correlation Coefficient

PUBLIC STORAGE  Arista Networks

Pay attention - limited upside

The 3 months correlation between PUBLIC and Arista is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PUBLIC STORAGE PRFO and Arista Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arista Networks and PUBLIC 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 PUBLIC STORAGE PRFO are associated (or correlated) with Arista Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arista Networks has no effect on the direction of PUBLIC STORAGE i.e., PUBLIC STORAGE and Arista Networks go up and down completely randomly.

Pair Corralation between PUBLIC STORAGE and Arista Networks

Assuming the 90 days trading horizon PUBLIC STORAGE is expected to generate 17.09 times less return on investment than Arista Networks. But when comparing it to its historical volatility, PUBLIC STORAGE PRFO is 2.84 times less risky than Arista Networks. It trades about 0.02 of its potential returns per unit of risk. Arista Networks is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,684  in Arista Networks on October 5, 2024 and sell it today you would earn a total of  8,022  from holding Arista Networks or generate 298.88% return on investment over 90 days.

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

PUBLIC STORAGE PRFO  vs.  Arista Networks

PUBLIC STORAGE PRFO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC STORAGE PRFO 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.

Arista Networks

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Arista Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Arista Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PUBLIC STORAGE and Arista Networks

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

The idea behind PUBLIC STORAGE PRFO and Arista Networks 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.