Correlation Between Credo Technology and Digi International

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

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

Diversification Opportunities for Credo Technology and Digi International

0.54

Correlation Coefficient

Credo Technology  Digi International

Very weak diversification

The 3 months correlation between Credo and Digi is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Credo Technology Group and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Credo Technology 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 Credo Technology Group 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 Credo Technology i.e., Credo Technology and Digi International go up and down completely randomly.

Pair Corralation between Credo Technology and Digi International

Given the investment horizon of 90 days Credo Technology Group is expected to under-perform the Digi International. In addition to that, Credo Technology is 2.36 times more volatile than Digi International. It trades about -0.07 of its total potential returns per unit of risk. Digi International is currently generating about 0.0 per unit of volatility. If you would invest  3,040  in Digi International on December 27, 2024 and sell it today you would lose (85.00) from holding Digi International or give up 2.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Credo Technology Group  vs.  Digi International

Credo Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Credo Technology Group 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Digi International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Digi International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Credo Technology and Digi International

The main advantage of trading using opposite Credo Technology and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credo Technology 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 Credo Technology Group 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.