Correlation Between DigiAsia Corp and VeriSign

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

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

Diversification Opportunities for DigiAsia Corp and VeriSign

-0.54

Correlation Coefficient

DigiAsia Corp  VeriSign

Excellent diversification

The 3 months correlation between DigiAsia and VeriSign is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding DigiAsia Corp and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of DigiAsia Corp i.e., DigiAsia Corp and VeriSign go up and down completely randomly.

Pair Corralation between DigiAsia Corp and VeriSign

Assuming the 90 days horizon DigiAsia Corp is expected to generate 20.15 times more return on investment than VeriSign. However, DigiAsia Corp is 20.15 times more volatile than VeriSign. It trades about 0.03 of its potential returns per unit of risk. VeriSign is currently generating about 0.35 per unit of risk. If you would invest  10.00  in DigiAsia Corp on December 24, 2024 and sell it today you would lose (5.00) from holding DigiAsia Corp or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

DigiAsia Corp  vs.  VeriSign

DigiAsia Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DigiAsia Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DigiAsia Corp showed solid returns over the last few months and may actually be approaching a breakup point.

VeriSign

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VeriSign displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DigiAsia Corp and VeriSign

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

The idea behind DigiAsia Corp and VeriSign 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.