Correlation Between Digital Realty and In Style

Can any of the company-specific risk be diversified away by investing in both Digital Realty and In Style 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 In Style 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 in Style Group, you can compare the effects of market volatilities on Digital Realty and In Style 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 In Style. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and In Style.

Diversification Opportunities for Digital Realty and In Style

-0.54

Correlation Coefficient

Digital Realty  In Style

Excellent diversification

The 3 months correlation between Digital and ITS is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and in Style Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on in Style Group 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 In Style. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of in Style Group has no effect on the direction of Digital Realty i.e., Digital Realty and In Style go up and down completely randomly.

Pair Corralation between Digital Realty and In Style

Assuming the 90 days trading horizon Digital Realty Trust is expected to under-perform the In Style. But the stock apears to be less risky and, when comparing its historical volatility, Digital Realty Trust is 1.3 times less risky than In Style. The stock trades about -0.25 of its potential returns per unit of risk. The in Style Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  380,000  in in Style Group on September 25, 2024 and sell it today you would earn a total of  10,000  from holding in Style Group or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Digital Realty Trust  vs.  in Style Group

Digital Realty Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Realty Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Digital Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

in Style Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in in Style Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, In Style is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Digital Realty and In Style

The main advantage of trading using opposite Digital Realty and In Style positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, In Style 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 In Style will offset losses from the drop in In Style's long position.

The idea behind Digital Realty Trust and in Style Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.