Correlation Between New Residential and Digital Realty

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

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

Diversification Opportunities for New Residential and Digital Realty

-0.66

Correlation Coefficient

New Residential  Digital Realty

Excellent diversification

The 3 months correlation between New and Digital is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust and New Residential 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 New Residential Investment are associated (or correlated) with Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of New Residential i.e., New Residential and Digital Realty go up and down completely randomly.

Pair Corralation between New Residential and Digital Realty

Assuming the 90 days trading horizon New Residential Investment is expected to generate 0.53 times more return on investment than Digital Realty. However, New Residential Investment is 1.88 times less risky than Digital Realty. It trades about 0.14 of its potential returns per unit of risk. Digital Realty Trust is currently generating about -0.1 per unit of risk. If you would invest  1,058  in New Residential Investment on December 21, 2024 and sell it today you would earn a total of  112.00  from holding New Residential Investment or generate 10.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

New Residential Investment  vs.  Digital Realty Trust

New Residential Inve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Digital Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with New Residential and Digital Realty

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

The idea behind New Residential Investment and Digital Realty Trust 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.