Correlation Between Digi International and TFI International

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

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

Diversification Opportunities for Digi International and TFI International

0.67

Correlation Coefficient

Digi International  TFI International

Poor diversification

The 3 months correlation between Digi and TFI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and TFI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFI International 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 TFI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFI International has no effect on the direction of Digi International i.e., Digi International and TFI International go up and down completely randomly.

Pair Corralation between Digi International and TFI International

Given the investment horizon of 90 days Digi International is expected to generate 9.36 times less return on investment than TFI International. In addition to that, Digi International is 1.39 times more volatile than TFI International. It trades about 0.0 of its total potential returns per unit of risk. TFI International is currently generating about 0.05 per unit of volatility. If you would invest  9,760  in TFI International on September 26, 2024 and sell it today you would earn a total of  4,375  from holding TFI International or generate 44.83% return on investment over 90 days.

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

Digi International  vs.  TFI International

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 weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

TFI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Digi International and TFI International

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

The idea behind Digi International and TFI International 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.