Correlation Between Digital Realty and Sage Group
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Sage 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 Sage 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 Sage Group PLC, you can compare the effects of market volatilities on Digital Realty and Sage 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 Sage Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Sage Group.
Diversification Opportunities for Digital Realty and Sage Group
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digital and Sage is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC 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 Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Digital Realty i.e., Digital Realty and Sage Group go up and down completely randomly.
Pair Corralation between Digital Realty and Sage Group
Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 1.2 times more return on investment than Sage Group. However, Digital Realty is 1.2 times more volatile than Sage Group PLC. It trades about 0.08 of its potential returns per unit of risk. Sage Group PLC is currently generating about 0.08 per unit of risk. If you would invest 9,423 in Digital Realty Trust on September 23, 2024 and sell it today you would earn a total of 8,643 from holding Digital Realty Trust or generate 91.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Digital Realty Trust vs. Sage Group PLC
Performance |
| Timeline |
| Digital Realty Trust |
| Sage Group PLC |
Digital Realty and Sage Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Sage Group
The main advantage of trading using opposite Digital Realty and Sage Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Sage 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 Sage Group will offset losses from the drop in Sage Group's long position.| Digital Realty vs. Uniper SE | Digital Realty vs. Mulberry Group PLC | Digital Realty vs. London Security Plc | Digital Realty vs. Triad Group PLC |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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