Correlation Between Digital Realty and RTL Group
Can any of the company-specific risk be diversified away by investing in both Digital Realty and RTL Group 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 RTL Group 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 RTL Group SA, you can compare the effects of market volatilities on Digital Realty and RTL Group 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 RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and RTL Group.
Diversification Opportunities for Digital Realty and RTL Group
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Digital and RTL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Digital Realty i.e., Digital Realty and RTL Group go up and down completely randomly.
Pair Corralation between Digital Realty and RTL Group
Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 0.47 times more return on investment than RTL Group. However, Digital Realty Trust is 2.12 times less risky than RTL Group. It trades about 0.21 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.28 per unit of risk. If you would invest 18,333 in Digital Realty Trust on August 31, 2024 and sell it today you would earn a total of 1,204 from holding Digital Realty Trust or generate 6.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Digital Realty Trust vs. RTL Group SA
Performance |
| Timeline |
| Digital Realty Trust |
| RTL Group SA |
Digital Realty and RTL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and RTL Group
The main advantage of trading using opposite Digital Realty and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, RTL Group 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 RTL Group will offset losses from the drop in RTL Group'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 |
| RTL Group vs. Gaztransport et Technigaz | RTL Group vs. Bisichi Mining PLC | RTL Group vs. EVS Broadcast Equipment | RTL Group vs. Molson Coors Beverage |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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