Correlation Between Digital Realty and XLMedia PLC

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

Diversification Opportunities for Digital Realty and XLMedia PLC

0.37

Correlation Coefficient

Digital Realty  XLMedia PLC

Weak diversification

The 3 months correlation between Digital and XLMedia is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Digital Realty i.e., Digital Realty and XLMedia PLC go up and down completely randomly.

Pair Corralation between Digital Realty and XLMedia PLC

Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 0.54 times more return on investment than XLMedia PLC. However, Digital Realty Trust is 1.84 times less risky than XLMedia PLC. It trades about 0.11 of its potential returns per unit of risk. XLMedia PLC is currently generating about -0.03 per unit of risk. If you would invest  16,396  in Digital Realty Trust on October 24, 2024 and sell it today you would earn a total of  1,947  from holding Digital Realty Trust or generate 11.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Digital Realty Trust  vs.  XLMedia PLC

Digital Realty Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Realty Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Digital Realty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

XLMedia PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XLMedia PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Digital Realty and XLMedia PLC

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

The idea behind Digital Realty Trust and XLMedia PLC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.