Correlation Between Digi International and Verde Clean

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

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

Diversification Opportunities for Digi International and Verde Clean

-0.03

Correlation Coefficient

Digi International  Verde Clean

Good diversification

The 3 months correlation between Digi and Verde is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels 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 Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of Digi International i.e., Digi International and Verde Clean go up and down completely randomly.

Pair Corralation between Digi International and Verde Clean

Given the investment horizon of 90 days Digi International is expected to under-perform the Verde Clean. But the stock apears to be less risky and, when comparing its historical volatility, Digi International is 1.97 times less risky than Verde Clean. The stock trades about -0.35 of its potential returns per unit of risk. The Verde Clean Fuels is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  398.00  in Verde Clean Fuels on October 11, 2024 and sell it today you would lose (25.00) from holding Verde Clean Fuels or give up 6.28% of portfolio value over 90 days.

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

Digi International  vs.  Verde Clean Fuels

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.

Verde Clean Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Digi International and Verde Clean

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

The idea behind Digi International and Verde Clean Fuels 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..