Correlation Between Digital Realty and EPR Properties

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

Diversification Opportunities for Digital Realty and EPR Properties

-0.64

Correlation Coefficient

Digital Realty  EPR Properties

Excellent diversification

The 3 months correlation between Digital and EPR is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and EPR Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPR Properties 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 EPR Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPR Properties has no effect on the direction of Digital Realty i.e., Digital Realty and EPR Properties go up and down completely randomly.

Pair Corralation between Digital Realty and EPR Properties

Considering the 90-day investment horizon Digital Realty Trust is expected to under-perform the EPR Properties. In addition to that, Digital Realty is 1.34 times more volatile than EPR Properties. It trades about -0.16 of its total potential returns per unit of risk. EPR Properties is currently generating about 0.01 per unit of volatility. If you would invest  4,354  in EPR Properties on January 9, 2025 and sell it today you would lose (1.00) from holding EPR Properties or give up 0.02% of portfolio value over 90 days.

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

Digital Realty Trust  vs.  EPR Properties

Digital Realty Trust

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

EPR Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days EPR Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, EPR Properties is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Digital Realty and EPR Properties

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

The idea behind Digital Realty Trust and EPR Properties 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.