Correlation Between Digital Locations and ENGlobal

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

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

Diversification Opportunities for Digital Locations and ENGlobal

-0.18

Correlation Coefficient

Digital Locations  ENGlobal

Good diversification

The 3 months correlation between Digital and ENGlobal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Digital Locations and ENGlobal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGlobal and Digital Locations 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 Digital Locations are associated (or correlated) with ENGlobal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGlobal has no effect on the direction of Digital Locations i.e., Digital Locations and ENGlobal go up and down completely randomly.

Pair Corralation between Digital Locations and ENGlobal

Given the investment horizon of 90 days Digital Locations is expected to under-perform the ENGlobal. In addition to that, Digital Locations is 3.34 times more volatile than ENGlobal. It trades about -0.1 of its total potential returns per unit of risk. ENGlobal is currently generating about -0.14 per unit of volatility. If you would invest  138.00  in ENGlobal on October 26, 2024 and sell it today you would lose (30.00) from holding ENGlobal or give up 21.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.15%
Values	Daily Returns

Digital Locations  vs.  ENGlobal

Digital Locations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Locations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ENGlobal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGlobal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic 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 Digital Locations and ENGlobal

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

The idea behind Digital Locations and ENGlobal 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.