Correlation Between Alumil Rom and Digi Communications

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

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

Diversification Opportunities for Alumil Rom and Digi Communications

0.61

Correlation Coefficient

Alumil Rom  Digi Communications

Poor diversification

The 3 months correlation between Alumil and Digi is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Alumil Rom Industry and Digi Communications NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi Communications and Alumil Rom 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 Alumil Rom Industry 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 Alumil Rom i.e., Alumil Rom and Digi Communications go up and down completely randomly.

Pair Corralation between Alumil Rom and Digi Communications

Assuming the 90 days trading horizon Alumil Rom is expected to generate 1.1 times less return on investment than Digi Communications. In addition to that, Alumil Rom is 1.4 times more volatile than Digi Communications NV. It trades about 0.08 of its total potential returns per unit of risk. Digi Communications NV is currently generating about 0.13 per unit of volatility. If you would invest  6,020  in Digi Communications NV on December 5, 2024 and sell it today you would earn a total of  600.00  from holding Digi Communications NV or generate 9.97% return on investment over 90 days.

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

Alumil Rom Industry  vs.  Digi Communications NV

Alumil Rom Industry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alumil Rom Industry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Alumil Rom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Digi Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi Communications NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Digi Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alumil Rom and Digi Communications

The main advantage of trading using opposite Alumil Rom and Digi Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alumil Rom 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 Alumil Rom Industry 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.