Correlation Between Digi International and Black Hills

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

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

Diversification Opportunities for Digi International and Black Hills

0.56

Correlation Coefficient

Digi International  Black Hills

Very weak diversification

The 3 months correlation between Digi and Black is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Digi International i.e., Digi International and Black Hills go up and down completely randomly.

Pair Corralation between Digi International and Black Hills

Given the investment horizon of 90 days Digi International is expected to generate 1.9 times more return on investment than Black Hills. However, Digi International is 1.9 times more volatile than Black Hills. It trades about 0.01 of its potential returns per unit of risk. Black Hills is currently generating about 0.0 per unit of risk. If you would invest  3,600  in Digi International on September 18, 2024 and sell it today you would lose (229.00) from holding Digi International or give up 6.36% of portfolio value over 90 days.

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

Digi International  vs.  Black Hills

Digi International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Black Hills

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Digi International and Black Hills

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

The idea behind Digi International and Black Hills 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.