Correlation Between Digi International and SOUTHERN

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

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

Diversification Opportunities for Digi International and SOUTHERN

-0.67

Correlation Coefficient

Digi International  SOUTHERN

Excellent diversification

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

Pair Corralation between Digi International and SOUTHERN

Given the investment horizon of 90 days Digi International is expected to under-perform the SOUTHERN. In addition to that, Digi International is 1.09 times more volatile than SOUTHERN PER CORP. It trades about -0.22 of its total potential returns per unit of risk. SOUTHERN PER CORP is currently generating about -0.07 per unit of volatility. If you would invest  11,455  in SOUTHERN PER CORP on September 24, 2024 and sell it today you would lose (276.00) from holding SOUTHERN PER CORP or give up 2.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Digi International  vs.  SOUTHERN PER CORP

Digi International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 7 (%) 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.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SOUTHERN PER CORP investors.

Pair Trading with Digi International and SOUTHERN

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

The idea behind Digi International and SOUTHERN PER CORP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.