Correlation Between Digital Realty and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Ally Financial 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 Ally Financial 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 Ally Financial, you can compare the effects of market volatilities on Digital Realty and Ally Financial 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 Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Ally Financial.
Diversification Opportunities for Digital Realty and Ally Financial
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Digital and Ally is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Digital Realty i.e., Digital Realty and Ally Financial go up and down completely randomly.
Pair Corralation between Digital Realty and Ally Financial
Assuming the 90 days trading horizon Digital Realty is expected to generate 1.82 times less return on investment than Ally Financial. But when comparing it to its historical volatility, Digital Realty Trust is 1.59 times less risky than Ally Financial. It trades about 0.2 of its potential returns per unit of risk. Ally Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,501 in Ally Financial on August 30, 2024 and sell it today you would earn a total of 418.00 from holding Ally Financial or generate 11.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Realty Trust vs. Ally Financial
Performance |
| Timeline |
| Digital Realty Trust |
| Ally Financial |
Digital Realty and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Ally Financial
The main advantage of trading using opposite Digital Realty and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Digital Realty vs. Various Eateries PLC | Digital Realty vs. The Mercantile Investment | Digital Realty vs. Blackrock World Mining | Digital Realty vs. Bisichi Mining PLC |
| Ally Financial vs. Tungsten West PLC | Ally Financial vs. Argo Group Limited | Ally Financial vs. Hardide PLC | Ally Financial vs. Versarien PLC |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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