Correlation Between Digital Realty and Equinix

Can any of the company-specific risk be diversified away by investing in both Digital Realty 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 Digital Realty and Equinix 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 Equinix, you can compare the effects of market volatilities on Digital Realty 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 Digital Realty with a short position of Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Equinix.

Diversification Opportunities for Digital Realty and Equinix

0.55

Correlation Coefficient

Digital Realty  Equinix

Very weak diversification

The 3 months correlation between Digital and Equinix is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 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 Digital Realty i.e., Digital Realty and Equinix go up and down completely randomly.

Pair Corralation between Digital Realty and Equinix

Considering the 90-day investment horizon Digital Realty is expected to generate 1.21 times less return on investment than Equinix. In addition to that, Digital Realty is 1.14 times more volatile than Equinix. It trades about 0.01 of its total potential returns per unit of risk. Equinix is currently generating about 0.02 per unit of volatility. If you would invest  70,441  in Equinix on January 24, 2024 and sell it today you would earn a total of  5,033  from holding Equinix or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Digital Realty Trust  vs.  Equinix

Digital Realty Trust

Risk-Adjusted Performance

0 of 100

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 relatively invariable essential indicators, Digital Realty is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Equinix

Risk-Adjusted Performance

0 of 100

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 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 Digital Realty and Equinix

The main advantage of trading using opposite Digital Realty and Equinix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty 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 Digital Realty Trust 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.