Correlation Between Global Net and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Global Net 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 Global Net and Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Net Lease and Digital Realty Trust, you can compare the effects of market volatilities on Global Net 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 Global Net with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Net and Digital Realty.
Diversification Opportunities for Global Net and Digital Realty
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Digital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease 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 Global Net 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 Global Net Lease 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 Global Net i.e., Global Net and Digital Realty go up and down completely randomly.
Pair Corralation between Global Net and Digital Realty
Assuming the 90 days trading horizon Global Net Lease is expected to under-perform the Digital Realty. In addition to that, Global Net is 1.94 times more volatile than Digital Realty Trust. It trades about -0.18 of its total potential returns per unit of risk. Digital Realty Trust is currently generating about -0.2 per unit of volatility. If you would invest 2,358 in Digital Realty Trust on August 24, 2024 and sell it today you would lose (80.00) from holding Digital Realty Trust or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Net Lease vs. Digital Realty Trust
Performance |
| Timeline |
| Global Net Lease |
| Digital Realty Trust |
Global Net and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Net and Digital Realty
The main advantage of trading using opposite Global Net and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net 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.| Global Net vs. Global Net Lease | Global Net vs. Global Medical REIT | Global Net vs. City Office REIT | Global Net vs. ARMOUR Residential REIT |
| Digital Realty vs. Digital Realty Trust | Digital Realty vs. Digital Realty Trust | Digital Realty vs. Federal Realty Investment | Digital Realty vs. Kimco Realty |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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