Correlation Between Equinix and ORT
Can any of the company-specific risk be diversified away by investing in both Equinix and ORT 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 ORT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinix and ORT, you can compare the effects of market volatilities on Equinix and ORT 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 ORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinix and ORT.
Diversification Opportunities for Equinix and ORT
Good diversification
The 3 months correlation between Equinix and ORT is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and ORT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORT 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 ORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORT has no effect on the direction of Equinix i.e., Equinix and ORT go up and down completely randomly.
Pair Corralation between Equinix and ORT
Given the investment horizon of 90 days Equinix is expected to under-perform the ORT. But the stock apears to be less risky and, when comparing its historical volatility, Equinix is 1.59 times less risky than ORT. The stock trades about -0.18 of its potential returns per unit of risk. The ORT is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 150,000 in ORT on January 26, 2024 and sell it today you would lose (5,300) from holding ORT or give up 3.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 76.19% |
Values | Daily Returns |
Equinix vs. ORT
Performance |
Timeline |
Equinix |
ORT |
Equinix and ORT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Equinix and ORT
The main advantage of trading using opposite Equinix and ORT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix position performs unexpectedly, ORT 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 ORT will offset losses from the drop in ORT's long position.Equinix vs. Crown Castle | Equinix vs. American Tower Corp | Equinix vs. Iron Mountain Incorporated | Equinix vs. Hannon Armstrong Sustainable |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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