Correlation Between Digital Realty and CVR Energy

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

Diversification Opportunities for Digital Realty and CVR Energy

0.2

Correlation Coefficient

Digital Realty  CVR Energy

Modest diversification

The 3 months correlation between Digital and CVR is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Digital Realty Trust and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Digital Realty i.e., Digital Realty and CVR Energy go up and down completely randomly.

Pair Corralation between Digital Realty and CVR Energy

Assuming the 90 days trading horizon Digital Realty Trust is expected to under-perform the CVR Energy. But the stock apears to be less risky and, when comparing its historical volatility, Digital Realty Trust is 1.3 times less risky than CVR Energy. The stock trades about -0.13 of its potential returns per unit of risk. The CVR Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,884  in CVR Energy on December 31, 2024 and sell it today you would earn a total of  147.00  from holding CVR Energy or generate 7.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Digital Realty Trust  vs.  CVR Energy

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CVR Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Digital Realty and CVR Energy

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

The idea behind Digital Realty Trust and CVR Energy 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.