Correlation Between Cardno and Digital Locations

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

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

Diversification Opportunities for Cardno and Digital Locations

0.11

Correlation Coefficient

Cardno  Digital Locations

Average diversification

The 3 months correlation between Cardno and Digital is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cardno Limited and Digital Locations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Locations and Cardno 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 Cardno Limited are associated (or correlated) with Digital Locations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Locations has no effect on the direction of Cardno i.e., Cardno and Digital Locations go up and down completely randomly.

Pair Corralation between Cardno and Digital Locations

Assuming the 90 days horizon Cardno Limited is expected to generate 0.97 times more return on investment than Digital Locations. However, Cardno Limited is 1.03 times less risky than Digital Locations. It trades about 0.14 of its potential returns per unit of risk. Digital Locations is currently generating about -0.16 per unit of risk. If you would invest  13.00  in Cardno Limited on October 26, 2024 and sell it today you would earn a total of  4.00  from holding Cardno Limited or generate 30.77% return on investment over 90 days.

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

Cardno Limited  vs.  Digital Locations

Cardno Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardno Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Cardno reported solid returns over the last few months and may actually be approaching a breakup point.

Digital Locations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Locations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cardno and Digital Locations

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

The idea behind Cardno Limited and Digital Locations 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.