Correlation Between Digital Realty and Baker Hughes
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Baker Hughes 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 Digital Realty and Baker Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Realty Trust and Baker Hughes Co, you can compare the effects of market volatilities on Digital Realty and Baker Hughes 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 Digital Realty with a short position of Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Baker Hughes.
Diversification Opportunities for Digital Realty and Baker Hughes
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Digital and Baker is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes and Digital 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 Digital Realty Trust are associated (or correlated) with Baker Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Hughes has no effect on the direction of Digital Realty i.e., Digital Realty and Baker Hughes go up and down completely randomly.
Pair Corralation between Digital Realty and Baker Hughes
Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 0.66 times more return on investment than Baker Hughes. However, Digital Realty Trust is 1.51 times less risky than Baker Hughes. It trades about -0.24 of its potential returns per unit of risk. Baker Hughes Co is currently generating about -0.26 per unit of risk. If you would invest 19,001 in Digital Realty Trust on September 24, 2024 and sell it today you would lose (935.00) from holding Digital Realty Trust or give up 4.92% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Digital Realty Trust vs. Baker Hughes Co
Performance |
Timeline |
Digital Realty Trust |
Baker Hughes |
Digital Realty and Baker Hughes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Digital Realty and Baker Hughes
The main advantage of trading using opposite Digital Realty and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Baker Hughes 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 Baker Hughes will offset losses from the drop in Baker Hughes' long position.Digital Realty vs. Uniper SE | Digital Realty vs. Mulberry Group PLC | Digital Realty vs. London Security Plc | Digital Realty vs. Triad Group PLC |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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