Correlation Between Digi International and EchoStar

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

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

Diversification Opportunities for Digi International and EchoStar

0.48

Correlation Coefficient

Digi International  EchoStar

Very weak diversification

The 3 months correlation between Digi and EchoStar is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of Digi International i.e., Digi International and EchoStar go up and down completely randomly.

Pair Corralation between Digi International and EchoStar

Given the investment horizon of 90 days Digi International is expected to under-perform the EchoStar. In addition to that, Digi International is 1.13 times more volatile than EchoStar. It trades about -0.02 of its total potential returns per unit of risk. EchoStar is currently generating about 0.06 per unit of volatility. If you would invest  2,301  in EchoStar on December 28, 2024 and sell it today you would earn a total of  198.00  from holding EchoStar or generate 8.6% return on investment over 90 days.

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

Digi International  vs.  EchoStar

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.

EchoStar

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EchoStar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Digi International and EchoStar

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

The idea behind Digi International and EchoStar 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.