Correlation Between Digital Realty and ASPEN TECHINC

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

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

Diversification Opportunities for Digital Realty and ASPEN TECHINC

0.9

Correlation Coefficient

Digital Realty  ASPEN TECHINC

Almost no diversification

The 3 months correlation between Digital and ASPEN is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL and Digital 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 Digital Realty Trust are associated (or correlated) with ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of Digital Realty i.e., Digital Realty and ASPEN TECHINC go up and down completely randomly.

Pair Corralation between Digital Realty and ASPEN TECHINC

Assuming the 90 days horizon Digital Realty Trust is expected to generate 0.8 times more return on investment than ASPEN TECHINC. However, Digital Realty Trust is 1.26 times less risky than ASPEN TECHINC. It trades about 0.08 of its potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.04 per unit of risk. If you would invest  9,043  in Digital Realty Trust on October 4, 2024 and sell it today you would earn a total of  7,859  from holding Digital Realty Trust or generate 86.91% return on investment over 90 days.

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

Digital Realty Trust  vs.  ASPEN TECHINC DL

Digital Realty Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Realty Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Digital Realty reported solid returns over the last few months and may actually be approaching a breakup point.

ASPEN TECHINC DL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digital Realty and ASPEN TECHINC

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

The idea behind Digital Realty Trust and ASPEN TECHINC DL 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.