Correlation Between Digital Locations and Great Lakes

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

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

Diversification Opportunities for Digital Locations and Great Lakes

-0.03

Correlation Coefficient

Digital Locations  Great Lakes

Good diversification

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

Pair Corralation between Digital Locations and Great Lakes

Given the investment horizon of 90 days Digital Locations is expected to generate 8.66 times more return on investment than Great Lakes. However, Digital Locations is 8.66 times more volatile than Great Lakes Dredge. It trades about 0.07 of its potential returns per unit of risk. Great Lakes Dredge is currently generating about -0.24 per unit of risk. If you would invest  0.05  in Digital Locations on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Digital Locations or generate 0.0% return on investment over 90 days.

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

Digital Locations  vs.  Great Lakes Dredge

Digital Locations

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Locations are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Digital Locations exhibited solid returns over the last few months and may actually be approaching a breakup point.

Great Lakes Dredge

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Lakes Dredge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Great Lakes is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Digital Locations and Great Lakes

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

The idea behind Digital Locations and Great Lakes Dredge 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.