Correlation Between DigiAsia Corp and Merrill Lynch

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

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

Diversification Opportunities for DigiAsia Corp and Merrill Lynch

0.62

Correlation Coefficient

DigiAsia Corp  Merrill Lynch

Poor diversification

The 3 months correlation between DigiAsia and Merrill is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding DigiAsia Corp and Merrill Lynch Depositor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Depositor and DigiAsia Corp 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 DigiAsia Corp are associated (or correlated) with Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Depositor has no effect on the direction of DigiAsia Corp i.e., DigiAsia Corp and Merrill Lynch go up and down completely randomly.

Pair Corralation between DigiAsia Corp and Merrill Lynch

Given the investment horizon of 90 days DigiAsia Corp is expected to under-perform the Merrill Lynch. In addition to that, DigiAsia Corp is 9.95 times more volatile than Merrill Lynch Depositor. It trades about -0.21 of its total potential returns per unit of risk. Merrill Lynch Depositor is currently generating about 0.02 per unit of volatility. If you would invest  2,616  in Merrill Lynch Depositor on September 19, 2024 and sell it today you would earn a total of  14.00  from holding Merrill Lynch Depositor or generate 0.54% return on investment over 90 days.

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

DigiAsia Corp  vs.  Merrill Lynch Depositor

DigiAsia Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigiAsia Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch Depositor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Merrill Lynch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DigiAsia Corp and Merrill Lynch

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

The idea behind DigiAsia Corp and Merrill Lynch Depositor 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.