Correlation Between Digital Realty and Novavax
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Novavax 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 Digital Realty and Novavax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Realty Trust and Novavax, you can compare the effects of market volatilities on Digital Realty and Novavax 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 Digital Realty with a short position of Novavax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Novavax.
Diversification Opportunities for Digital Realty and Novavax
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Digital and Novavax is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax and Digital Realty 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 Digital Realty Trust are associated (or correlated) with Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Digital Realty i.e., Digital Realty and Novavax go up and down completely randomly.
Pair Corralation between Digital Realty and Novavax
Assuming the 90 days trading horizon Digital Realty is expected to generate 5.95 times less return on investment than Novavax. But when comparing it to its historical volatility, Digital Realty Trust is 13.6 times less risky than Novavax. It trades about 0.21 of its potential returns per unit of risk. Novavax is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,190 in Novavax on August 31, 2024 and sell it today you would earn a total of 0.00 from holding Novavax or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Digital Realty Trust vs. Novavax
Performance |
| Timeline |
| Digital Realty Trust |
| Novavax |
Digital Realty and Novavax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Novavax
The main advantage of trading using opposite Digital Realty and Novavax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Novavax 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 Novavax will offset losses from the drop in Novavax's long position.| Digital Realty vs. Westlake Chemical Corp | Digital Realty vs. Panther Metals PLC | Digital Realty vs. Futura Medical | Digital Realty vs. Golden Metal Resources |
| Novavax vs. Ironveld Plc | Novavax vs. Bank of Ireland | Novavax vs. Erste Group Bank | Novavax vs. St Galler Kantonalbank |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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