Correlation Between Digi International and Ciena Corp

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

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

Diversification Opportunities for Digi International and Ciena Corp

0.64

Correlation Coefficient

Digi International  Ciena Corp

Poor diversification

The 3 months correlation between Digi and Ciena is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena 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 Ciena Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciena Corp has no effect on the direction of Digi International i.e., Digi International and Ciena Corp go up and down completely randomly.

Pair Corralation between Digi International and Ciena Corp

Given the investment horizon of 90 days Digi International is expected to generate 0.74 times more return on investment than Ciena Corp. However, Digi International is 1.35 times less risky than Ciena Corp. It trades about 0.0 of its potential returns per unit of risk. Ciena Corp is currently generating about -0.09 per unit of risk. If you would invest  3,040  in Digi International on December 27, 2024 and sell it today you would lose (85.00) from holding Digi International or give up 2.8% of portfolio value over 90 days.

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

Digi International  vs.  Ciena Corp

Digi International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digi International has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Ciena Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ciena Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Digi International and Ciena Corp

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

The idea behind Digi International and Ciena 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.