Correlation Between DG Innovate and Overstock

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

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

Diversification Opportunities for DG Innovate and Overstock

-0.8

Correlation Coefficient

DG Innovate  Overstock

Pay attention - limited upside

The 3 months correlation between DGI and Overstock is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding DG Innovate PLC and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock and DG Innovate 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 DG Innovate PLC are associated (or correlated) with Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of DG Innovate i.e., DG Innovate and Overstock go up and down completely randomly.

Pair Corralation between DG Innovate and Overstock

Assuming the 90 days trading horizon DG Innovate PLC is expected to under-perform the Overstock. In addition to that, DG Innovate is 2.07 times more volatile than Overstock. It trades about -0.17 of its total potential returns per unit of risk. Overstock is currently generating about 0.03 per unit of volatility. If you would invest  650.00  in Overstock on December 2, 2024 and sell it today you would lose (16.00) from holding Overstock or give up 2.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	65.63%
Values	Daily Returns

DG Innovate PLC  vs.  Overstock

DG Innovate PLC

Risk-Adjusted Performance

Very Weak

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

Overstock

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Overstock are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Overstock may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DG Innovate and Overstock

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

The idea behind DG Innovate PLC and Overstock 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.