Correlation Between Applied Digital and Boralex

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

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

Diversification Opportunities for Applied Digital and Boralex

-0.53

Correlation Coefficient

Applied Digital  Boralex

Excellent diversification

The 3 months correlation between Applied and Boralex is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex 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 Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Applied Digital i.e., Applied Digital and Boralex go up and down completely randomly.

Pair Corralation between Applied Digital and Boralex

Given the investment horizon of 90 days Applied Digital is expected to generate 2.89 times more return on investment than Boralex. However, Applied Digital is 2.89 times more volatile than Boralex. It trades about 0.07 of its potential returns per unit of risk. Boralex is currently generating about -0.02 per unit of risk. If you would invest  225.00  in Applied Digital on October 7, 2024 and sell it today you would earn a total of  686.00  from holding Applied Digital or generate 304.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.82%
Values	Daily Returns

Applied Digital  vs.  Boralex

Applied Digital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Digital are ranked lower than 7 (%) 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.

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Applied Digital and Boralex

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

The idea behind Applied Digital and Boralex 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.