Correlation Between Digi International and Infinera

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

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

Diversification Opportunities for Digi International and Infinera

-0.46

Correlation Coefficient

Digi International  Infinera

Very good diversification

The 3 months correlation between Digi and Infinera is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera 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 Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Digi International i.e., Digi International and Infinera go up and down completely randomly.

Pair Corralation between Digi International and Infinera

Given the investment horizon of 90 days Digi International is expected to under-perform the Infinera. In addition to that, Digi International is 9.94 times more volatile than Infinera. It trades about 0.0 of its total potential returns per unit of risk. Infinera is currently generating about 0.1 per unit of volatility. If you would invest  656.00  in Infinera on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Infinera or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	67.21%
Values	Daily Returns

Digi International  vs.  Infinera

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.

Infinera

Risk-Adjusted Performance

OK

Over the last 90 days Infinera has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Digi International and Infinera

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

The idea behind Digi International and Infinera 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.