Correlation Between Digital Realty and Equinix
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Equinix 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 Equinix 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 Equinix, you can compare the effects of market volatilities on Digital Realty and Equinix 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 Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Equinix.
Diversification Opportunities for Digital Realty and Equinix
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Digital and Equinix is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Digital Realty i.e., Digital Realty and Equinix go up and down completely randomly.
Pair Corralation between Digital Realty and Equinix
Considering the 90-day investment horizon Digital Realty Trust is expected to generate 0.95 times more return on investment than Equinix. However, Digital Realty Trust is 1.05 times less risky than Equinix. It trades about 0.04 of its potential returns per unit of risk. Equinix is currently generating about -0.01 per unit of risk. If you would invest 17,681 in Digital Realty Trust on October 20, 2024 and sell it today you would earn a total of 162.00 from holding Digital Realty Trust or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Realty Trust vs. Equinix
Performance |
| Timeline |
| Digital Realty Trust |
| Equinix |
Digital Realty and Equinix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Equinix
The main advantage of trading using opposite Digital Realty and Equinix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Equinix 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 Equinix will offset losses from the drop in Equinix's long position.| Digital Realty vs. American Tower Corp | Digital Realty vs. Crown Castle | Digital Realty vs. Iron Mountain Incorporated | Digital Realty vs. SBA Communications Corp |
| Equinix vs. Crown Castle | Equinix vs. American Tower Corp | Equinix vs. Iron Mountain Incorporated | Equinix vs. Hannon Armstrong Sustainable |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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