Correlation Between Roper Technologies, and Extra Space

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

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

Diversification Opportunities for Roper Technologies, and Extra Space

-0.63

Correlation Coefficient

Roper Technologies,  Extra Space

Excellent diversification

The 3 months correlation between Roper and Extra is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Roper Technologies, 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 Roper Technologies, 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 Roper Technologies, 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 Roper Technologies, i.e., Roper Technologies, and Extra Space go up and down completely randomly.

Pair Corralation between Roper Technologies, and Extra Space

Assuming the 90 days trading horizon Roper Technologies, is expected to generate 0.01 times more return on investment than Extra Space. However, Roper Technologies, is 143.44 times less risky than Extra Space. It trades about 0.13 of its potential returns per unit of risk. Extra Space Storage is currently generating about -0.06 per unit of risk. If you would invest  33,267  in Roper Technologies, on December 23, 2024 and sell it today you would earn a total of  33.00  from holding Roper Technologies, or generate 0.1% return on investment over 90 days.

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

Roper Technologies,  vs.  Extra Space Storage

Roper Technologies,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Roper Technologies, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Roper Technologies, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Roper Technologies, and Extra Space

The main advantage of trading using opposite Roper Technologies, and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roper Technologies, 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 Roper Technologies, 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.