Correlation Between EPR Properties and Digital Realty
Can any of the company-specific risk be diversified away by investing in both EPR 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 EPR 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 EPR Properties Series and Digital Realty Trust, you can compare the effects of market volatilities on EPR 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 EPR Properties with a short position of Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of EPR Properties and Digital Realty.
Diversification Opportunities for EPR Properties and Digital Realty
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EPR and Digital is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding EPR Properties Series 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 EPR 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 EPR Properties Series 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 EPR Properties i.e., EPR Properties and Digital Realty go up and down completely randomly.
Pair Corralation between EPR Properties and Digital Realty
Assuming the 90 days trading horizon EPR Properties Series is expected to under-perform the Digital Realty. But the preferred stock apears to be less risky and, when comparing its historical volatility, EPR Properties Series is 1.32 times less risky than Digital Realty. The preferred stock trades about -0.36 of its potential returns per unit of risk. The Digital Realty Trust is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 2,358 in Digital Realty Trust on August 24, 2024 and sell it today you would lose (80.00) from holding Digital Realty Trust or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EPR Properties Series vs. Digital Realty Trust
Performance |
| Timeline |
| EPR Properties Series |
| Digital Realty Trust |
EPR Properties and Digital Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EPR Properties and Digital Realty
The main advantage of trading using opposite EPR Properties and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EPR 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.| EPR Properties vs. EPR Properties | EPR Properties vs. EPR Properties | EPR Properties vs. Lexington Realty Trust | EPR Properties vs. RLJ Lodging Trust |
| Digital Realty vs. Digital Realty Trust | Digital Realty vs. Digital Realty Trust | Digital Realty vs. Federal Realty Investment | Digital Realty vs. Kimco Realty |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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