Correlation Between DigitalOcean Holdings and MondayCom

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

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

Diversification Opportunities for DigitalOcean Holdings and MondayCom

0.78

Correlation Coefficient

DigitalOcean Holdings  MondayCom

Poor diversification

The 3 months correlation between DigitalOcean and MondayCom is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DigitalOcean Holdings and MondayCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MondayCom and DigitalOcean 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 DigitalOcean Holdings are associated (or correlated) with MondayCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MondayCom has no effect on the direction of DigitalOcean Holdings i.e., DigitalOcean Holdings and MondayCom go up and down completely randomly.

Pair Corralation between DigitalOcean Holdings and MondayCom

Given the investment horizon of 90 days DigitalOcean Holdings is expected to generate 1.19 times less return on investment than MondayCom. But when comparing it to its historical volatility, DigitalOcean Holdings is 1.49 times less risky than MondayCom. It trades about 0.06 of its potential returns per unit of risk. MondayCom is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  27,470  in MondayCom on December 2, 2024 and sell it today you would earn a total of  2,207  from holding MondayCom or generate 8.03% return on investment over 90 days.

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

DigitalOcean Holdings  vs.  MondayCom

DigitalOcean Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalOcean Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, DigitalOcean Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MondayCom

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MondayCom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, MondayCom showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DigitalOcean Holdings and MondayCom

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

The idea behind DigitalOcean Holdings and MondayCom 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.