Correlation Between Digi International and Steven Madden

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

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

Diversification Opportunities for Digi International and Steven Madden

-0.68

Correlation Coefficient

Digi International  Steven Madden

Excellent diversification

The 3 months correlation between Digi and Steven is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Digi International i.e., Digi International and Steven Madden go up and down completely randomly.

Pair Corralation between Digi International and Steven Madden

Given the investment horizon of 90 days Digi International is expected to generate 1.6 times more return on investment than Steven Madden. However, Digi International is 1.6 times more volatile than Steven Madden. It trades about 0.1 of its potential returns per unit of risk. Steven Madden is currently generating about 0.0 per unit of risk. If you would invest  2,244  in Digi International on September 22, 2024 and sell it today you would earn a total of  830.00  from holding Digi International or generate 36.99% return on investment over 90 days.

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

Digi International  vs.  Steven Madden

Digi International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Digi International and Steven Madden

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

The idea behind Digi International and Steven Madden 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.