Correlation Between Digital Realty and Axon Enterprise
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Axon Enterprise 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 Axon Enterprise 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 Axon Enterprise, you can compare the effects of market volatilities on Digital Realty and Axon Enterprise 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 Axon Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Axon Enterprise.
Diversification Opportunities for Digital Realty and Axon Enterprise
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Digital and Axon is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise 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 Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of Digital Realty i.e., Digital Realty and Axon Enterprise go up and down completely randomly.
Pair Corralation between Digital Realty and Axon Enterprise
Assuming the 90 days trading horizon Digital Realty is expected to generate 5.95 times less return on investment than Axon Enterprise. But when comparing it to its historical volatility, Digital Realty Trust is 4.29 times less risky than Axon Enterprise. It trades about 0.2 of its potential returns per unit of risk. Axon Enterprise is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 44,586 in Axon Enterprise on August 30, 2024 and sell it today you would earn a total of 18,688 from holding Axon Enterprise or generate 41.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Realty Trust vs. Axon Enterprise
Performance |
| Timeline |
| Digital Realty Trust |
| Axon Enterprise |
Digital Realty and Axon Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Axon Enterprise
The main advantage of trading using opposite Digital Realty and Axon Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Axon Enterprise 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 Axon Enterprise will offset losses from the drop in Axon Enterprise's long position.| Digital Realty vs. Lendinvest PLC | Digital Realty vs. Neometals | Digital Realty vs. Albion Technology General | Digital Realty vs. Jupiter Fund Management |
| Axon Enterprise vs. Lendinvest PLC | Axon Enterprise vs. Neometals | Axon Enterprise vs. Albion Technology General | Axon Enterprise vs. Jupiter Fund Management |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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