Correlation Between Digi International and Macmahon Holdings

Can any of the company-specific risk be diversified away by investing in both Digi International and Macmahon 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 Macmahon 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 Macmahon Holdings Limited, you can compare the effects of market volatilities on Digi International and Macmahon 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 Macmahon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and Macmahon Holdings.

Diversification Opportunities for Digi International and Macmahon Holdings

0.45

Correlation Coefficient

Digi International  Macmahon Holdings

Very weak diversification

The 3 months correlation between Digi and Macmahon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon 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 Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of Digi International i.e., Digi International and Macmahon Holdings go up and down completely randomly.

Pair Corralation between Digi International and Macmahon Holdings

Given the investment horizon of 90 days Digi International is expected to generate 1.31 times less return on investment than Macmahon Holdings. But when comparing it to its historical volatility, Digi International is 1.52 times less risky than Macmahon Holdings. It trades about 0.08 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Macmahon Holdings Limited on October 25, 2024 and sell it today you would earn a total of  5.00  from holding Macmahon Holdings Limited or generate 29.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Digi International  vs.  Macmahon Holdings Limited

Digi International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Macmahon Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macmahon Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Digi International and Macmahon Holdings

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

The idea behind Digi International and Macmahon Holdings 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.