Correlation Between Atmos Energy and Digi International

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

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

Diversification Opportunities for Atmos Energy and Digi International

0.75

Correlation Coefficient

Atmos Energy  Digi International

Poor diversification

The 3 months correlation between Atmos and Digi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Atmos Energy and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Atmos Energy 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 Atmos Energy are associated (or correlated) with Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Atmos Energy i.e., Atmos Energy and Digi International go up and down completely randomly.

Pair Corralation between Atmos Energy and Digi International

Considering the 90-day investment horizon Atmos Energy is expected to generate 0.41 times more return on investment than Digi International. However, Atmos Energy is 2.47 times less risky than Digi International. It trades about 0.05 of its potential returns per unit of risk. Digi International is currently generating about 0.01 per unit of risk. If you would invest  10,919  in Atmos Energy on September 18, 2024 and sell it today you would earn a total of  3,103  from holding Atmos Energy or generate 28.42% return on investment over 90 days.

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

Atmos Energy  vs.  Digi International

Atmos Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Atmos Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Digi International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Atmos Energy and Digi International

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

The idea behind Atmos Energy and Digi International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.