Correlation Between Digi International and 70082LAB3

Can any of the company-specific risk be diversified away by investing in both Digi International and 70082LAB3 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 70082LAB3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Digi International and US70082LAB36, you can compare the effects of market volatilities on Digi International and 70082LAB3 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 70082LAB3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and 70082LAB3.

Diversification Opportunities for Digi International and 70082LAB3

0.47

Correlation Coefficient

Digi International  70082LAB3

Very weak diversification

The 3 months correlation between Digi and 70082LAB3 is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and US70082LAB36 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US70082LAB36 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 70082LAB3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US70082LAB36 has no effect on the direction of Digi International i.e., Digi International and 70082LAB3 go up and down completely randomly.

Pair Corralation between Digi International and 70082LAB3

Given the investment horizon of 90 days Digi International is expected to generate 262.41 times less return on investment than 70082LAB3. But when comparing it to its historical volatility, Digi International is 25.85 times less risky than 70082LAB3. It trades about 0.01 of its potential returns per unit of risk. US70082LAB36 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,125  in US70082LAB36 on October 21, 2024 and sell it today you would earn a total of  1,875  from holding US70082LAB36 or generate 26.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	44.76%
Values	Daily Returns

Digi International  vs.  US70082LAB36

Digi International

Risk-Adjusted Performance

0 of 100

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.

US70082LAB36

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US70082LAB36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 70082LAB3 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digi International and 70082LAB3

The main advantage of trading using opposite Digi International and 70082LAB3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International position performs unexpectedly, 70082LAB3 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 70082LAB3 will offset losses from the drop in 70082LAB3's long position.

The idea behind Digi International and US70082LAB36 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.