Correlation Between Outfront Media and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Outfront Media 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 Outfront Media and Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Outfront Media and Digital Realty Trust, you can compare the effects of market volatilities on Outfront Media 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 Outfront Media with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outfront Media and Digital Realty.
Diversification Opportunities for Outfront Media and Digital Realty
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Outfront and Digital is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Outfront Media 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 Outfront Media 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 Outfront Media 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 Outfront Media i.e., Outfront Media and Digital Realty go up and down completely randomly.
Pair Corralation between Outfront Media and Digital Realty
Considering the 90-day investment horizon Outfront Media is expected to generate 0.79 times more return on investment than Digital Realty. However, Outfront Media is 1.27 times less risky than Digital Realty. It trades about 0.13 of its potential returns per unit of risk. Digital Realty Trust is currently generating about -0.13 per unit of risk. If you would invest 1,795 in Outfront Media on November 9, 2024 and sell it today you would earn a total of 91.00 from holding Outfront Media or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Outfront Media vs. Digital Realty Trust
Performance |
| Timeline |
| Outfront Media |
| Digital Realty Trust |
Outfront Media and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Outfront Media and Digital Realty
The main advantage of trading using opposite Outfront Media and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outfront Media 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.| Outfront Media vs. PotlatchDeltic Corp | Outfront Media vs. Gaming Leisure Properties | Outfront Media vs. Rayonier | Outfront Media vs. Weyerhaeuser |
| Digital Realty vs. American Tower Corp | Digital Realty vs. Crown Castle | Digital Realty vs. Iron Mountain Incorporated | Digital Realty vs. SBA Communications Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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