Correlation Between Digi International and Canopy Growth

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

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

Diversification Opportunities for Digi International and Canopy Growth

-0.31

Correlation Coefficient

Digi International  Canopy Growth

Very good diversification

The 3 months correlation between Digi and Canopy is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Digi International i.e., Digi International and Canopy Growth go up and down completely randomly.

Pair Corralation between Digi International and Canopy Growth

Given the investment horizon of 90 days Digi International is expected to generate 0.62 times more return on investment than Canopy Growth. However, Digi International is 1.6 times less risky than Canopy Growth. It trades about -0.3 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.37 per unit of risk. If you would invest  3,300  in Digi International on October 10, 2024 and sell it today you would lose (382.00) from holding Digi International or give up 11.58% of portfolio value over 90 days.

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

Digi International  vs.  Canopy Growth Corp

Digi International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Digi International and Canopy Growth

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

The idea behind Digi International and Canopy Growth Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.