Correlation Between Equinix and City Developments

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

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

Diversification Opportunities for Equinix and City Developments

-0.13

Correlation Coefficient

Equinix  City Developments

Good diversification

The 3 months correlation between Equinix and City is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments and Equinix 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 Equinix are associated (or correlated) with City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of Equinix i.e., Equinix and City Developments go up and down completely randomly.

Pair Corralation between Equinix and City Developments

Given the investment horizon of 90 days Equinix is expected to under-perform the City Developments. But the stock apears to be less risky and, when comparing its historical volatility, Equinix is 1.45 times less risky than City Developments. The stock trades about -0.08 of its potential returns per unit of risk. The City Developments is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  370.00  in City Developments on December 19, 2024 and sell it today you would earn a total of  7.00  from holding City Developments or generate 1.89% return on investment over 90 days.

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

Equinix  vs.  City Developments

Equinix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

City Developments

Risk-Adjusted Performance

Weak

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

Pair Trading with Equinix and City Developments

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

The idea behind Equinix and City Developments 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 Stocks Directory module to find actively traded stocks across global markets.