Correlation Between Digi International and TruBridge

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

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

Diversification Opportunities for Digi International and TruBridge

0.19

Correlation Coefficient

Digi International  TruBridge

Average diversification

The 3 months correlation between Digi and TruBridge is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and TruBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TruBridge 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 TruBridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TruBridge has no effect on the direction of Digi International i.e., Digi International and TruBridge go up and down completely randomly.

Pair Corralation between Digi International and TruBridge

Given the investment horizon of 90 days Digi International is expected to generate 2.67 times less return on investment than TruBridge. But when comparing it to its historical volatility, Digi International is 1.17 times less risky than TruBridge. It trades about 0.04 of its potential returns per unit of risk. TruBridge is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,167  in TruBridge on December 3, 2024 and sell it today you would earn a total of  1,773  from holding TruBridge or generate 151.93% return on investment over 90 days.

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

Digi International  vs.  TruBridge

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 latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

TruBridge

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in TruBridge are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TruBridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digi International and TruBridge

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

The idea behind Digi International and TruBridge 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.