Correlation Between Las Vegas and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Las Vegas 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 Las Vegas and Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Las Vegas Sands and Digital Realty Trust, you can compare the effects of market volatilities on Las Vegas 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 Las Vegas with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Las Vegas and Digital Realty.
Diversification Opportunities for Las Vegas and Digital Realty
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Las and Digital is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Las Vegas Sands 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 Las Vegas 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 Las Vegas Sands 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 Las Vegas i.e., Las Vegas and Digital Realty go up and down completely randomly.
Pair Corralation between Las Vegas and Digital Realty
Assuming the 90 days trading horizon Las Vegas Sands is expected to under-perform the Digital Realty. But the stock apears to be less risky and, when comparing its historical volatility, Las Vegas Sands is 1.03 times less risky than Digital Realty. The stock trades about -0.13 of its potential returns per unit of risk. The Digital Realty Trust is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 18,321 in Digital Realty Trust on August 30, 2024 and sell it today you would earn a total of 1,189 from holding Digital Realty Trust or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Las Vegas Sands vs. Digital Realty Trust
Performance |
| Timeline |
| Las Vegas Sands |
| Digital Realty Trust |
Las Vegas and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Las Vegas and Digital Realty
The main advantage of trading using opposite Las Vegas and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Las Vegas 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.| Las Vegas vs. Lendinvest PLC | Las Vegas vs. Neometals | Las Vegas vs. Albion Technology General | Las Vegas vs. Jupiter Fund Management |
| Digital Realty vs. Lendinvest PLC | Digital Realty vs. Neometals | Digital Realty vs. Albion Technology General | Digital Realty 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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