Correlation Between Digital Realty and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Ebro Foods 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 Ebro Foods 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 Ebro Foods, you can compare the effects of market volatilities on Digital Realty and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Ebro Foods.
Diversification Opportunities for Digital Realty and Ebro Foods
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digital and Ebro is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods 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 Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Digital Realty i.e., Digital Realty and Ebro Foods go up and down completely randomly.
Pair Corralation between Digital Realty and Ebro Foods
Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 2.36 times more return on investment than Ebro Foods. However, Digital Realty is 2.36 times more volatile than Ebro Foods. It trades about 0.08 of its potential returns per unit of risk. Ebro Foods is currently generating about 0.03 per unit of risk. If you would invest 10,144 in Digital Realty Trust on August 24, 2024 and sell it today you would earn a total of 8,848 from holding Digital Realty Trust or generate 87.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.0% |
| Values | Daily Returns |
Digital Realty Trust vs. Ebro Foods
Performance |
| Timeline |
| Digital Realty Trust |
| Ebro Foods |
Digital Realty and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Ebro Foods
The main advantage of trading using opposite Digital Realty and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| Digital Realty vs. Quadrise Plc | Digital Realty vs. Intuitive Investments Group | Digital Realty vs. European Metals Holdings | Digital Realty vs. Athelney Trust plc |
| Ebro Foods vs. Quadrise Plc | Ebro Foods vs. Intuitive Investments Group | Ebro Foods vs. European Metals Holdings | Ebro Foods vs. Athelney Trust 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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