Correlation Between Digi Communications and Electroarges

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

By analyzing existing cross correlation between Digi Communications NV and Electroarges S, you can compare the effects of market volatilities on Digi Communications and Electroarges 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 Communications with a short position of Electroarges. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi Communications and Electroarges.

Diversification Opportunities for Digi Communications and Electroarges

0.43

Correlation Coefficient

Digi Communications  Electroarges

Very weak diversification

The 3 months correlation between Digi and Electroarges is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Digi Communications NV and Electroarges S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electroarges S and Digi Communications 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 Communications NV are associated (or correlated) with Electroarges. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electroarges S has no effect on the direction of Digi Communications i.e., Digi Communications and Electroarges go up and down completely randomly.

Pair Corralation between Digi Communications and Electroarges

Assuming the 90 days trading horizon Digi Communications NV is expected to generate 0.34 times more return on investment than Electroarges. However, Digi Communications NV is 2.96 times less risky than Electroarges. It trades about -0.04 of its potential returns per unit of risk. Electroarges S is currently generating about -0.05 per unit of risk. If you would invest  6,700  in Digi Communications NV on October 8, 2024 and sell it today you would lose (300.00) from holding Digi Communications NV or give up 4.48% of portfolio value over 90 days.

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

Digi Communications NV  vs.  Electroarges S

Digi Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digi Communications NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Digi Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Electroarges S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electroarges S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Digi Communications and Electroarges

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

The idea behind Digi Communications NV and Electroarges S 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.