Correlation Between Digi International and RALPH

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

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

Diversification Opportunities for Digi International and RALPH

-0.61

Correlation Coefficient

Digi International  RALPH

Excellent diversification

The 3 months correlation between Digi and RALPH is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and RALPH LAUREN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RALPH LAUREN P 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 RALPH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RALPH LAUREN P has no effect on the direction of Digi International i.e., Digi International and RALPH go up and down completely randomly.

Pair Corralation between Digi International and RALPH

Given the investment horizon of 90 days Digi International is expected to generate 7.97 times more return on investment than RALPH. However, Digi International is 7.97 times more volatile than RALPH LAUREN P. It trades about 0.21 of its potential returns per unit of risk. RALPH LAUREN P is currently generating about -0.11 per unit of risk. If you would invest  2,591  in Digi International on September 12, 2024 and sell it today you would earn a total of  766.00  from holding Digi International or generate 29.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Digi International  vs.  RALPH LAUREN P

Digi International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 16 (%) 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.

RALPH LAUREN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RALPH LAUREN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RALPH 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 RALPH

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

The idea behind Digi International and RALPH LAUREN P 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.