Correlation Between CarsalesCom and DGTL Holdings

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

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

Diversification Opportunities for CarsalesCom and DGTL Holdings

-0.1

Correlation Coefficient

CarsalesCom  DGTL Holdings

Good diversification

The 3 months correlation between CarsalesCom and DGTL is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom Ltd ADR and DGTL Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGTL Holdings and CarsalesCom 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 CarsalesCom Ltd ADR are associated (or correlated) with DGTL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGTL Holdings has no effect on the direction of CarsalesCom i.e., CarsalesCom and DGTL Holdings go up and down completely randomly.

Pair Corralation between CarsalesCom and DGTL Holdings

Assuming the 90 days horizon CarsalesCom is expected to generate 32.55 times less return on investment than DGTL Holdings. But when comparing it to its historical volatility, CarsalesCom Ltd ADR is 31.01 times less risky than DGTL Holdings. It trades about 0.08 of its potential returns per unit of risk. DGTL Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  51.00  in DGTL Holdings on September 21, 2024 and sell it today you would lose (50.40) from holding DGTL Holdings or give up 98.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

CarsalesCom Ltd ADR  vs.  DGTL Holdings

CarsalesCom ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, CarsalesCom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DGTL Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CarsalesCom and DGTL Holdings

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

The idea behind CarsalesCom Ltd ADR and DGTL Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..