Correlation Between Vornado Realty and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Vornado Realty 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 Vornado Realty and Digital Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vornado Realty Trust and Digital Realty Trust, you can compare the effects of market volatilities on Vornado Realty 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 Vornado Realty with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vornado Realty and Digital Realty.
Diversification Opportunities for Vornado Realty and Digital Realty
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vornado and Digital is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vornado Realty Trust 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 Vornado 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 Vornado Realty Trust 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 Vornado Realty i.e., Vornado Realty and Digital Realty go up and down completely randomly.
Pair Corralation between Vornado Realty and Digital Realty
Assuming the 90 days trading horizon Vornado Realty Trust is expected to generate 1.58 times more return on investment than Digital Realty. However, Vornado Realty is 1.58 times more volatile than Digital Realty Trust. It trades about 0.09 of its potential returns per unit of risk. Digital Realty Trust is currently generating about 0.06 per unit of risk. If you would invest 1,487 in Vornado Realty Trust on August 28, 2024 and sell it today you would earn a total of 303.00 from holding Vornado Realty Trust or generate 20.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Vornado Realty Trust vs. Digital Realty Trust
Performance |
| Timeline |
| Vornado Realty Trust |
| Digital Realty Trust |
Vornado Realty and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vornado Realty and Digital Realty
The main advantage of trading using opposite Vornado Realty and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vornado Realty 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.| Vornado Realty vs. SL Green Realty | Vornado Realty vs. Vornado Realty Trust | Vornado Realty vs. City Office REIT | Vornado Realty vs. Vornado Realty Trust |
| Digital Realty vs. EPR Properties | Digital Realty vs. Digital Realty Trust | Digital Realty vs. Gladstone Land Corp | Digital Realty vs. EPR Properties |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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