Correlation Between Digi International and Coupang LLC

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

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

Diversification Opportunities for Digi International and Coupang LLC

0.3

Correlation Coefficient

Digi International  Coupang LLC

Weak diversification

The 3 months correlation between Digi and Coupang is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Coupang LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coupang LLC 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 Coupang LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coupang LLC has no effect on the direction of Digi International i.e., Digi International and Coupang LLC go up and down completely randomly.

Pair Corralation between Digi International and Coupang LLC

Given the investment horizon of 90 days Digi International is expected to generate 0.89 times more return on investment than Coupang LLC. However, Digi International is 1.12 times less risky than Coupang LLC. It trades about 0.13 of its potential returns per unit of risk. Coupang LLC is currently generating about 0.03 per unit of risk. If you would invest  2,813  in Digi International on September 5, 2024 and sell it today you would earn a total of  511.00  from holding Digi International or generate 18.17% return on investment over 90 days.

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

Digi International  vs.  Coupang LLC

Digi International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 10 (%) 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.

Coupang LLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coupang LLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Coupang LLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Digi International and Coupang LLC

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

The idea behind Digi International and Coupang LLC 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.