Correlation Between Dollar Tree and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Dollar Tree and Digital Realty 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 Dollar Tree and Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollar Tree and Digital Realty Trust, you can compare the effects of market volatilities on Dollar Tree and Digital Realty 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 Dollar Tree with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollar Tree and Digital Realty.
Diversification Opportunities for Dollar Tree and Digital Realty
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dollar and Digital is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dollar Tree and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust and Dollar Tree 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 Dollar Tree are associated (or correlated) with Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of Dollar Tree i.e., Dollar Tree and Digital Realty go up and down completely randomly.
Pair Corralation between Dollar Tree and Digital Realty
Assuming the 90 days trading horizon Dollar Tree is expected to under-perform the Digital Realty. In addition to that, Dollar Tree is 1.55 times more volatile than Digital Realty Trust. It trades about -0.05 of its total potential returns per unit of risk. Digital Realty Trust is currently generating about 0.13 per unit of volatility. If you would invest 9,704 in Digital Realty Trust on August 31, 2024 and sell it today you would earn a total of 10,059 from holding Digital Realty Trust or generate 103.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.91% |
| Values | Daily Returns |
Dollar Tree vs. Digital Realty Trust
Performance |
| Timeline |
| Dollar Tree |
| Digital Realty Trust |
Dollar Tree and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollar Tree and Digital Realty
The main advantage of trading using opposite Dollar Tree and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollar Tree position performs unexpectedly, Digital Realty 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 Digital Realty will offset losses from the drop in Digital Realty's long position.| Dollar Tree vs. Worldwide Healthcare Trust | Dollar Tree vs. Cardinal Health | Dollar Tree vs. Veolia Environnement VE | Dollar Tree vs. Primary Health Properties |
| Digital Realty vs. Westlake Chemical Corp | Digital Realty vs. Panther Metals PLC | Digital Realty vs. Futura Medical | Digital Realty vs. Golden Metal Resources |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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