Correlation Between EastGroup Properties and Digital Realty

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

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

Diversification Opportunities for EastGroup Properties and Digital Realty

-0.79

Correlation Coefficient

EastGroup Properties  Digital Realty

Pay attention - limited upside

The 3 months correlation between EastGroup and Digital is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding EastGroup Properties 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 EastGroup Properties 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 EastGroup Properties 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 EastGroup Properties i.e., EastGroup Properties and Digital Realty go up and down completely randomly.

Pair Corralation between EastGroup Properties and Digital Realty

Considering the 90-day investment horizon EastGroup Properties is expected to under-perform the Digital Realty. In addition to that, EastGroup Properties is 1.09 times more volatile than Digital Realty Trust. It trades about -0.14 of its total potential returns per unit of risk. Digital Realty Trust is currently generating about -0.11 per unit of volatility. If you would invest  18,470  in Digital Realty Trust on September 21, 2024 and sell it today you would lose (613.00) from holding Digital Realty Trust or give up 3.32% of portfolio value over 90 days.

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

EastGroup Properties  vs.  Digital Realty Trust

EastGroup Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EastGroup Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Digital Realty Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Realty Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Digital Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with EastGroup Properties and Digital Realty

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

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.