Correlation Between DGTL Holdings and Locafy

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

By analyzing existing cross correlation between DGTL Holdings and Locafy Limited, you can compare the effects of market volatilities on DGTL Holdings and Locafy 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 DGTL Holdings with a short position of Locafy. Check out your portfolio center. Please also check ongoing floating volatility patterns of DGTL Holdings and Locafy.

Diversification Opportunities for DGTL Holdings and Locafy

0.32

Correlation Coefficient

DGTL Holdings  Locafy

Weak diversification

The 3 months correlation between DGTL and Locafy is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding DGTL Holdings and Locafy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locafy Limited and DGTL Holdings 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 DGTL Holdings are associated (or correlated) with Locafy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locafy Limited has no effect on the direction of DGTL Holdings i.e., DGTL Holdings and Locafy go up and down completely randomly.

Pair Corralation between DGTL Holdings and Locafy

Assuming the 90 days horizon DGTL Holdings is expected to generate 1.9 times less return on investment than Locafy. In addition to that, DGTL Holdings is 1.08 times more volatile than Locafy Limited. It trades about 0.09 of its total potential returns per unit of risk. Locafy Limited is currently generating about 0.17 per unit of volatility. If you would invest  740.00  in Locafy Limited on December 2, 2024 and sell it today you would earn a total of  156.00  from holding Locafy Limited or generate 21.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.87%
Values	Daily Returns

DGTL Holdings  vs.  Locafy Limited

DGTL Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DGTL Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, DGTL Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Locafy Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DGTL Holdings and Locafy

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

The idea behind DGTL Holdings and Locafy Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.