Correlation Between Applied Digital and BigBearai Holdings

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

By analyzing existing cross correlation between Applied Digital and BigBearai Holdings, you can compare the effects of market volatilities on Applied Digital and BigBearai Holdings 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 Applied Digital with a short position of BigBearai Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and BigBearai Holdings.

Diversification Opportunities for Applied Digital and BigBearai Holdings

0.39

Correlation Coefficient

Applied Digital  BigBearai Holdings

Weak diversification

The 3 months correlation between Applied and BigBearai is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and BigBearai Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BigBearai Holdings and Applied Digital 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 Applied Digital are associated (or correlated) with BigBearai Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BigBearai Holdings has no effect on the direction of Applied Digital i.e., Applied Digital and BigBearai Holdings go up and down completely randomly.

Pair Corralation between Applied Digital and BigBearai Holdings

Given the investment horizon of 90 days Applied Digital is expected to generate 7.04 times less return on investment than BigBearai Holdings. But when comparing it to its historical volatility, Applied Digital is 1.45 times less risky than BigBearai Holdings. It trades about 0.04 of its potential returns per unit of risk. BigBearai Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  173.00  in BigBearai Holdings on October 21, 2024 and sell it today you would earn a total of  219.00  from holding BigBearai Holdings or generate 126.59% return on investment over 90 days.

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

Applied Digital  vs.  BigBearai Holdings

Applied Digital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Digital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

BigBearai Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BigBearai Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, BigBearai Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Digital and BigBearai Holdings

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

The idea behind Applied Digital and BigBearai Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.