Correlation Between Digi International and J Long

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

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

Diversification Opportunities for Digi International and J Long

-0.52

Correlation Coefficient

Digi International  J Long

Excellent diversification

The 3 months correlation between Digi and J Long is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and J Long Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Long Group 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 J Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Long Group has no effect on the direction of Digi International i.e., Digi International and J Long go up and down completely randomly.

Pair Corralation between Digi International and J Long

Given the investment horizon of 90 days Digi International is expected to generate 0.26 times more return on investment than J Long. However, Digi International is 3.78 times less risky than J Long. It trades about 0.04 of its potential returns per unit of risk. J Long Group Limited is currently generating about -0.03 per unit of risk. If you would invest  2,356  in Digi International on October 14, 2024 and sell it today you would earn a total of  482.00  from holding Digi International or generate 20.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Digi International  vs.  J Long Group Limited

Digi International

Risk-Adjusted Performance

0 of 100

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.

J Long Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in J Long Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, J Long disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digi International and J Long

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

The idea behind Digi International and J Long Group Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.