Correlation Between Digi International and Volt Lithium

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

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

Diversification Opportunities for Digi International and Volt Lithium

-0.66

Correlation Coefficient

Digi International  Volt Lithium

Excellent diversification

The 3 months correlation between Digi and Volt is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Volt Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volt Lithium Corp 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 Volt Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volt Lithium Corp has no effect on the direction of Digi International i.e., Digi International and Volt Lithium go up and down completely randomly.

Pair Corralation between Digi International and Volt Lithium

Given the investment horizon of 90 days Digi International is expected to generate 41.02 times less return on investment than Volt Lithium. But when comparing it to its historical volatility, Digi International is 3.0 times less risky than Volt Lithium. It trades about 0.0 of its potential returns per unit of risk. Volt Lithium Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Volt Lithium Corp on October 10, 2024 and sell it today you would lose (5.00) from holding Volt Lithium Corp or give up 18.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.87%
Values	Daily Returns

Digi International  vs.  Volt Lithium Corp

Digi International

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Volt Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volt Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Digi International and Volt Lithium

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

The idea behind Digi International and Volt Lithium 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.