Correlation Between Digital Realty and VPC Specialty
Can any of the company-specific risk be diversified away by investing in both Digital Realty and VPC Specialty 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 VPC Specialty 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 VPC Specialty Lending, you can compare the effects of market volatilities on Digital Realty and VPC Specialty 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 VPC Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Realty and VPC Specialty.
Diversification Opportunities for Digital Realty and VPC Specialty
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Digital and VPC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and VPC Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VPC Specialty Lending 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 VPC Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VPC Specialty Lending has no effect on the direction of Digital Realty i.e., Digital Realty and VPC Specialty go up and down completely randomly.
Pair Corralation between Digital Realty and VPC Specialty
Assuming the 90 days trading horizon Digital Realty is expected to generate 1.7 times less return on investment than VPC Specialty. But when comparing it to its historical volatility, Digital Realty Trust is 2.3 times less risky than VPC Specialty. It trades about 0.18 of its potential returns per unit of risk. VPC Specialty Lending is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,231 in VPC Specialty Lending on April 25, 2025 and sell it today you would earn a total of 249.00 from holding VPC Specialty Lending or generate 20.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.41% |
Values | Daily Returns |
Digital Realty Trust vs. VPC Specialty Lending
Performance |
Timeline |
Digital Realty Trust |
VPC Specialty Lending |
Digital Realty and VPC Specialty Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Digital Realty and VPC Specialty
The main advantage of trading using opposite Digital Realty and VPC Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Realty position performs unexpectedly, VPC Specialty 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 VPC Specialty will offset losses from the drop in VPC Specialty's long position.Digital Realty vs. AMG Advanced Metallurgical | Digital Realty vs. MT Bank Corp | Digital Realty vs. Rheinmetall AG | Digital Realty vs. Cembra Money Bank |
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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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