Correlation Between Digi International and Cannae Holdings

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Can any of the company-specific risk be diversified away by investing in both Digi International and Cannae Holdings 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 Cannae Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digi International and Cannae Holdings, you can compare the effects of market volatilities on Digi International and Cannae Holdings 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 Cannae Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and Cannae Holdings.

Diversification Opportunities for Digi International and Cannae Holdings

0.8
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between Digi International and Cannae Holdings

Given the investment horizon of 90 days Digi International is expected to under-perform the Cannae Holdings. In addition to that, Digi International is 1.73 times more volatile than Cannae Holdings. It trades about -0.16 of its total potential returns per unit of risk. Cannae Holdings is currently generating about -0.2 per unit of volatility. If you would invest  2,100  in Cannae Holdings on September 23, 2024 and sell it today you would lose (101.00) from holding Cannae Holdings or give up 4.81% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Digi International  vs.  Cannae Holdings

 Performance 
       Timeline  
Digi International 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Cannae Holdings 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Cannae Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cannae Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Digi International and Cannae Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Digi International and Cannae Holdings

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

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