Correlation Between Essential Properties and DigitalBridge

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

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

Diversification Opportunities for Essential Properties and DigitalBridge

-0.55

Correlation Coefficient

Essential Properties  DigitalBridge

Excellent diversification

The 3 months correlation between Essential and DigitalBridge is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Essential Properties Realty and DigitalBridge Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalBridge Group and Essential 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 Essential Properties Realty are associated (or correlated) with DigitalBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalBridge Group has no effect on the direction of Essential Properties i.e., Essential Properties and DigitalBridge go up and down completely randomly.

Pair Corralation between Essential Properties and DigitalBridge

Given the investment horizon of 90 days Essential Properties Realty is expected to under-perform the DigitalBridge. But the stock apears to be less risky and, when comparing its historical volatility, Essential Properties Realty is 1.13 times less risky than DigitalBridge. The stock trades about -0.02 of its potential returns per unit of risk. The DigitalBridge Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,111  in DigitalBridge Group on April 30, 2025 and sell it today you would earn a total of  97.00  from holding DigitalBridge Group or generate 4.59% return on investment over 90 days.

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

Essential Properties Realty  vs.  DigitalBridge Group

Essential Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Essential Properties Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Essential Properties is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

DigitalBridge Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalBridge Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, DigitalBridge is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Essential Properties and DigitalBridge

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

The idea behind Essential Properties Realty and DigitalBridge Group 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.