Correlation Between American Assets and Extra Space

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

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

Diversification Opportunities for American Assets and Extra Space

0.82

Correlation Coefficient

American Assets  Extra Space

Very poor diversification

The 3 months correlation between American and Extra is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding American Assets Trust 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 American Assets 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 American Assets Trust 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 American Assets i.e., American Assets and Extra Space go up and down completely randomly.

Pair Corralation between American Assets and Extra Space

Considering the 90-day investment horizon American Assets Trust is expected to under-perform the Extra Space. But the stock apears to be less risky and, when comparing its historical volatility, American Assets Trust is 1.02 times less risky than Extra Space. The stock trades about -0.09 of its potential returns per unit of risk. The Extra Space Storage is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  15,318  in Extra Space Storage on February 14, 2025 and sell it today you would lose (616.00) from holding Extra Space Storage or give up 4.02% of portfolio value over 90 days.

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

American Assets Trust  vs.  Extra Space Storage

American Assets Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Assets Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private 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. Even with relatively invariable basic indicators, Extra Space is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with American Assets and Extra Space

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

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.