Correlation Between Digital Realty and Lowland Investment

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

Diversification Opportunities for Digital Realty and Lowland Investment

-0.26

Correlation Coefficient

Digital Realty  Lowland Investment

Very good diversification

The 3 months correlation between Digital and Lowland is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Lowland Investment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowland Investment 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 Lowland Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowland Investment has no effect on the direction of Digital Realty i.e., Digital Realty and Lowland Investment go up and down completely randomly.

Pair Corralation between Digital Realty and Lowland Investment

Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 1.57 times more return on investment than Lowland Investment. However, Digital Realty is 1.57 times more volatile than Lowland Investment Co. It trades about 0.08 of its potential returns per unit of risk. Lowland Investment Co is currently generating about 0.02 per unit of risk. If you would invest  11,208  in Digital Realty Trust on October 4, 2024 and sell it today you would earn a total of  6,527  from holding Digital Realty Trust or generate 58.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.47%
Values	Daily Returns

Digital Realty Trust  vs.  Lowland Investment Co

Digital Realty Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Realty Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Digital Realty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lowland Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lowland Investment Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Lowland Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Digital Realty and Lowland Investment

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

The idea behind Digital Realty Trust and Lowland Investment Co 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.