Correlation Between Alexandria Real and Equinix

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

By analyzing existing cross correlation between Alexandria Real Estate and Equinix, you can compare the effects of market volatilities on Alexandria Real and Equinix 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 Alexandria Real with a short position of Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alexandria Real and Equinix.

Diversification Opportunities for Alexandria Real and Equinix

0.24

Correlation Coefficient

Alexandria Real  Equinix

Modest diversification

The 3 months correlation between Alexandria and Equinix is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alexandria Real Estate and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix and Alexandria Real 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 Alexandria Real Estate are associated (or correlated) with Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Alexandria Real i.e., Alexandria Real and Equinix go up and down completely randomly.

Pair Corralation between Alexandria Real and Equinix

Considering the 90-day investment horizon Alexandria Real Estate is expected to under-perform the Equinix. In addition to that, Alexandria Real is 1.25 times more volatile than Equinix. It trades about -0.03 of its total potential returns per unit of risk. Equinix is currently generating about 0.05 per unit of volatility. If you would invest  66,138  in Equinix on November 19, 2024 and sell it today you would earn a total of  27,222  from holding Equinix or generate 41.16% return on investment over 90 days.

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

Alexandria Real Estate  vs.  Equinix

Alexandria Real Estate

Risk-Adjusted Performance

Very Weak

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

Equinix

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alexandria Real and Equinix

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

The idea behind Alexandria Real Estate and Equinix 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.