Correlation Between Digi International and GENERAL

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

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

Diversification Opportunities for Digi International and GENERAL

0.18

Correlation Coefficient

Digi International  GENERAL

Average diversification

The 3 months correlation between Digi and GENERAL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Digi International i.e., Digi International and GENERAL go up and down completely randomly.

Pair Corralation between Digi International and GENERAL

Given the investment horizon of 90 days Digi International is expected to generate 3.1 times more return on investment than GENERAL. However, Digi International is 3.1 times more volatile than GENERAL ELEC CAP. It trades about 0.05 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.06 per unit of risk. If you would invest  3,051  in Digi International on October 26, 2024 and sell it today you would earn a total of  151.00  from holding Digi International or generate 4.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.0%
Values	Daily Returns

Digi International  vs.  GENERAL ELEC CAP

Digi International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward indicators, Digi International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digi International and GENERAL

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

The idea behind Digi International and GENERAL ELEC CAP 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.