Correlation Between Alro Slatina and Digi Communications

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

By analyzing existing cross correlation between Alro Slatina and Digi Communications NV, you can compare the effects of market volatilities on Alro Slatina and Digi Communications 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 Alro Slatina with a short position of Digi Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alro Slatina and Digi Communications.

Diversification Opportunities for Alro Slatina and Digi Communications

0.3

Correlation Coefficient

Alro Slatina  Digi Communications

Weak diversification

The 3 months correlation between Alro and Digi is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Alro Slatina and Digi Communications NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi Communications and Alro Slatina 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 Alro Slatina are associated (or correlated) with Digi Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi Communications has no effect on the direction of Alro Slatina i.e., Alro Slatina and Digi Communications go up and down completely randomly.

Pair Corralation between Alro Slatina and Digi Communications

Assuming the 90 days trading horizon Alro Slatina is expected to generate 2.14 times less return on investment than Digi Communications. In addition to that, Alro Slatina is 1.79 times more volatile than Digi Communications NV. It trades about 0.02 of its total potential returns per unit of risk. Digi Communications NV is currently generating about 0.08 per unit of volatility. If you would invest  6,400  in Digi Communications NV on December 28, 2024 and sell it today you would earn a total of  280.00  from holding Digi Communications NV or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Alro Slatina  vs.  Digi Communications NV

Alro Slatina

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alro Slatina are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Alro Slatina is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Digi Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digi Communications NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Digi Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alro Slatina and Digi Communications

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

The idea behind Alro Slatina and Digi Communications NV 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.