Correlation Between Rayonier and Digital Realty

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

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

Diversification Opportunities for Rayonier and Digital Realty

-0.65

Correlation Coefficient

Rayonier  Digital Realty

Excellent diversification

The 3 months correlation between Rayonier and Digital is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier 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 Rayonier 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 Rayonier 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 Rayonier i.e., Rayonier and Digital Realty go up and down completely randomly.

Pair Corralation between Rayonier and Digital Realty

Considering the 90-day investment horizon Rayonier is expected to generate 0.57 times more return on investment than Digital Realty. However, Rayonier is 1.74 times less risky than Digital Realty. It trades about 0.11 of its potential returns per unit of risk. Digital Realty Trust is currently generating about -0.14 per unit of risk. If you would invest  2,564  in Rayonier on December 29, 2024 and sell it today you would earn a total of  221.00  from holding Rayonier or generate 8.62% return on investment over 90 days.

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

Rayonier  vs.  Digital Realty Trust

Rayonier

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Rayonier 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. Even with uncertain performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Rayonier and Digital Realty

The main advantage of trading using opposite Rayonier and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rayonier 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 Rayonier 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.