Correlation Between Digital Realty and Farmland Partners
Can any of the company-specific risk be diversified away by investing in both Digital Realty and Farmland Partners 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 Farmland Partners 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 Farmland Partners, you can compare the effects of market volatilities on Digital Realty and Farmland Partners 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 Farmland Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and Farmland Partners.
Diversification Opportunities for Digital Realty and Farmland Partners
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Digital and Farmland is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and Farmland Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmland Partners 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 Farmland Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmland Partners has no effect on the direction of Digital Realty i.e., Digital Realty and Farmland Partners go up and down completely randomly.
Pair Corralation between Digital Realty and Farmland Partners
Considering the 90-day investment horizon Digital Realty Trust is expected to under-perform the Farmland Partners. In addition to that, Digital Realty is 1.99 times more volatile than Farmland Partners. It trades about -0.13 of its total potential returns per unit of risk. Farmland Partners is currently generating about 0.03 per unit of volatility. If you would invest 1,177 in Farmland Partners on November 9, 2024 and sell it today you would earn a total of 6.00 from holding Farmland Partners or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Realty Trust vs. Farmland Partners
Performance |
| Timeline |
| Digital Realty Trust |
| Farmland Partners |
Digital Realty and Farmland Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Realty and Farmland Partners
The main advantage of trading using opposite Digital Realty and Farmland Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, Farmland Partners 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 Farmland Partners will offset losses from the drop in Farmland Partners' long position.| Digital Realty vs. American Tower Corp | Digital Realty vs. Crown Castle | Digital Realty vs. Iron Mountain Incorporated | Digital Realty vs. SBA Communications Corp |
| Farmland Partners vs. PotlatchDeltic Corp | Farmland Partners vs. Weyerhaeuser | Farmland Partners vs. Outfront Media | Farmland Partners vs. Gaming Leisure Properties |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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