Correlation Between Federal Realty and Datagroup

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

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

Diversification Opportunities for Federal Realty and Datagroup

0.15

Correlation Coefficient

Federal Realty  Datagroup

Average diversification

The 3 months correlation between Federal and Datagroup is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Datagroup SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datagroup SE and Federal 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 Federal Realty Investment are associated (or correlated) with Datagroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datagroup SE has no effect on the direction of Federal Realty i.e., Federal Realty and Datagroup go up and down completely randomly.

Pair Corralation between Federal Realty and Datagroup

Assuming the 90 days trading horizon Federal Realty Investment is expected to under-perform the Datagroup. But the stock apears to be less risky and, when comparing its historical volatility, Federal Realty Investment is 1.82 times less risky than Datagroup. The stock trades about -0.16 of its potential returns per unit of risk. The Datagroup SE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,435  in Datagroup SE on September 25, 2024 and sell it today you would earn a total of  190.00  from holding Datagroup SE or generate 4.28% return on investment over 90 days.

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

Federal Realty Investment  vs.  Datagroup SE

Federal Realty Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Federal Realty is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Datagroup SE

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Datagroup SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Datagroup unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Realty and Datagroup

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

The idea behind Federal Realty Investment and Datagroup SE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.