Correlation Between Realty Income and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Realty Income 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 Realty Income and Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and Digital Realty Trust, you can compare the effects of market volatilities on Realty Income 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 Realty Income with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and Digital Realty.
Diversification Opportunities for Realty Income and Digital Realty
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Realty and Digital is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income 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 Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and Digital Realty go up and down completely randomly.
Pair Corralation between Realty Income and Digital Realty
Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Digital Realty. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.46 times less risky than Digital Realty. The stock trades about -0.25 of its potential returns per unit of risk. The Digital Realty Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 18,331 in Digital Realty Trust on August 27, 2024 and sell it today you would earn a total of 653.00 from holding Digital Realty Trust or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Realty Income vs. Digital Realty Trust
Performance |
| Timeline |
| Realty Income |
| Digital Realty Trust |
Realty Income and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Realty Income and Digital Realty
The main advantage of trading using opposite Realty Income and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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.| Realty Income vs. Federal Realty Investment | Realty Income vs. Macerich Company | Realty Income vs. National Retail Properties | Realty Income vs. Kimco Realty |
| Digital Realty vs. Crown Castle | Digital Realty vs. American Tower Corp | Digital Realty vs. Iron Mountain Incorporated | Digital Realty 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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