Correlation Between Digi International and Air Lease

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

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

Diversification Opportunities for Digi International and Air Lease

0.79

Correlation Coefficient

Digi International  Air Lease

Poor diversification

The 3 months correlation between Digi and Air is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Digi International 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 Digi International are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Digi International i.e., Digi International and Air Lease go up and down completely randomly.

Pair Corralation between Digi International and Air Lease

Given the investment horizon of 90 days Digi International is expected to generate 1.42 times less return on investment than Air Lease. In addition to that, Digi International is 1.4 times more volatile than Air Lease. It trades about 0.06 of its total potential returns per unit of risk. Air Lease is currently generating about 0.12 per unit of volatility. If you would invest  4,377  in Air Lease on September 21, 2024 and sell it today you would earn a total of  369.00  from holding Air Lease or generate 8.43% return on investment over 90 days.

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

Digi International  vs.  Air Lease

Digi International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Air Lease

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Digi International and Air Lease

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

The idea behind Digi International and Air Lease 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.