Correlation Between Armada Hflr and Digital Realty

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

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

Diversification Opportunities for Armada Hflr and Digital Realty

-0.35

Correlation Coefficient

Armada Hflr  Digital Realty

Very good diversification

The 3 months correlation between Armada and Digital is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr 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 Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and Digital Realty go up and down completely randomly.

Pair Corralation between Armada Hflr and Digital Realty

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Digital Realty. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 1.07 times less risky than Digital Realty. The stock trades about -0.25 of its potential returns per unit of risk. The Digital Realty Trust is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  17,533  in Digital Realty Trust on September 20, 2024 and sell it today you would lose (469.00) from holding Digital Realty Trust or give up 2.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Armada Hflr Pr  vs.  Digital Realty Trust

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Digital Realty Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Realty Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Digital Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armada Hflr and Digital Realty

The main advantage of trading using opposite Armada Hflr and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.