Correlation Between DEXUS and Equinix

Can any of the company-specific risk be diversified away by investing in both DEXUS 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 DEXUS and Equinix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DEXUS and Equinix, you can compare the effects of market volatilities on DEXUS 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 DEXUS with a short position of Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEXUS and Equinix.

Diversification Opportunities for DEXUS and Equinix

-0.65

Correlation Coefficient

DEXUS  Equinix

Excellent diversification

The 3 months correlation between DEXUS and Equinix is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding DEXUS and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix and DEXUS 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 DEXUS 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 DEXUS i.e., DEXUS and Equinix go up and down completely randomly.

Pair Corralation between DEXUS and Equinix

Assuming the 90 days trading horizon DEXUS is expected to under-perform the Equinix. But the stock apears to be less risky and, when comparing its historical volatility, DEXUS is 1.25 times less risky than Equinix. The stock trades about -0.15 of its potential returns per unit of risk. The Equinix is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  77,910  in Equinix on September 22, 2024 and sell it today you would earn a total of  10,990  from holding Equinix or generate 14.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DEXUS  vs.  Equinix

DEXUS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DEXUS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Equinix

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Equinix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DEXUS and Equinix

The main advantage of trading using opposite DEXUS and Equinix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DEXUS 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.

The idea behind DEXUS and Equinix pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.