Correlation Between Compass and Digital Turbine

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

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

Diversification Opportunities for Compass and Digital Turbine

0.57

Correlation Coefficient

Compass  Digital Turbine

Very weak diversification

The 3 months correlation between Compass and Digital is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Compass and Digital Turbine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Turbine and Compass 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 Compass are associated (or correlated) with Digital Turbine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Turbine has no effect on the direction of Compass i.e., Compass and Digital Turbine go up and down completely randomly.

Pair Corralation between Compass and Digital Turbine

Given the investment horizon of 90 days Compass is expected to generate 1.66 times less return on investment than Digital Turbine. But when comparing it to its historical volatility, Compass is 2.79 times less risky than Digital Turbine. It trades about 0.17 of its potential returns per unit of risk. Digital Turbine is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Digital Turbine on December 29, 2024 and sell it today you would earn a total of  102.00  from holding Digital Turbine or generate 56.04% return on investment over 90 days.

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

Compass  vs.  Digital Turbine

Compass

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compass are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Compass reported solid returns over the last few months and may actually be approaching a breakup point.

Digital Turbine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Turbine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Digital Turbine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compass and Digital Turbine

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

The idea behind Compass and Digital Turbine 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.