Correlation Between Plymouth Industrial and Extra Space

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

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

Diversification Opportunities for Plymouth Industrial and Extra Space

0.34

Correlation Coefficient

Plymouth Industrial  Extra Space

Weak diversification

The 3 months correlation between Plymouth and Extra is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Plymouth Industrial REIT 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 Plymouth Industrial 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 Plymouth Industrial REIT 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 Plymouth Industrial i.e., Plymouth Industrial and Extra Space go up and down completely randomly.

Pair Corralation between Plymouth Industrial and Extra Space

Given the investment horizon of 90 days Plymouth Industrial REIT is expected to under-perform the Extra Space. But the stock apears to be less risky and, when comparing its historical volatility, Plymouth Industrial REIT is 1.33 times less risky than Extra Space. The stock trades about -0.02 of its potential returns per unit of risk. The Extra Space Storage is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,987  in Extra Space Storage on February 19, 2024 and sell it today you would earn a total of  1,202  from holding Extra Space Storage or generate 8.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Plymouth Industrial REIT  vs.  Extra Space Storage

Plymouth Industrial REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Plymouth Industrial REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Plymouth Industrial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Extra Space Storage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Extra Space Storage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Extra Space may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Plymouth Industrial and Extra Space

The main advantage of trading using opposite Plymouth Industrial and Extra Space positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plymouth Industrial 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 Plymouth Industrial REIT 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.