Correlation Between Digital Realty and Public Storage

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

Diversification Opportunities for Digital Realty and Public Storage

0.72

Correlation Coefficient

Digital Realty  Public Storage

Poor diversification

The 3 months correlation between Digital and Public is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Public Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Storage 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 Public Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Storage has no effect on the direction of Digital Realty i.e., Digital Realty and Public Storage go up and down completely randomly.

Pair Corralation between Digital Realty and Public Storage

Assuming the 90 days trading horizon Digital Realty Trust is expected to generate 1.44 times more return on investment than Public Storage. However, Digital Realty is 1.44 times more volatile than Public Storage. It trades about 0.01 of its potential returns per unit of risk. Public Storage is currently generating about -0.01 per unit of risk. If you would invest  2,331  in Digital Realty Trust on September 4, 2024 and sell it today you would earn a total of  8.00  from holding Digital Realty Trust or generate 0.34% return on investment over 90 days.

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

Digital Realty Trust  vs.  Public Storage

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 steady basic indicators, Digital Realty is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Public Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Public Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Public Storage is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Digital Realty and Public Storage

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

The idea behind Digital Realty Trust and Public Storage 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.