Correlation Between SYSTEMAIR and Digital Realty

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

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

Diversification Opportunities for SYSTEMAIR and Digital Realty

0.63

Correlation Coefficient

SYSTEMAIR  Digital Realty

Poor diversification

The 3 months correlation between SYSTEMAIR and Digital is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB 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 SYSTEMAIR 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 SYSTEMAIR AB 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 SYSTEMAIR i.e., SYSTEMAIR and Digital Realty go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Digital Realty

Assuming the 90 days trading horizon SYSTEMAIR is expected to generate 3.83 times less return on investment than Digital Realty. In addition to that, SYSTEMAIR is 1.28 times more volatile than Digital Realty Trust. It trades about 0.04 of its total potential returns per unit of risk. Digital Realty Trust is currently generating about 0.18 per unit of volatility. If you would invest  14,150  in Digital Realty Trust on October 5, 2024 and sell it today you would earn a total of  2,752  from holding Digital Realty Trust or generate 19.45% return on investment over 90 days.

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

SYSTEMAIR AB  vs.  Digital Realty Trust

SYSTEMAIR AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SYSTEMAIR AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SYSTEMAIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Digital Realty Trust

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Digital Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Digital Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SYSTEMAIR and Digital Realty

The main advantage of trading using opposite SYSTEMAIR and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SYSTEMAIR 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 SYSTEMAIR AB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.