Correlation Between GEAR4MUSIC (HLDGS) and Digilife Technologies

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC (HLDGS) and Digilife Technologies 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 GEAR4MUSIC (HLDGS) and Digilife Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Digilife Technologies Limited, you can compare the effects of market volatilities on GEAR4MUSIC (HLDGS) and Digilife Technologies 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 GEAR4MUSIC (HLDGS) with a short position of Digilife Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC (HLDGS) and Digilife Technologies.

Diversification Opportunities for GEAR4MUSIC (HLDGS) and Digilife Technologies

0.84

Correlation Coefficient

GEAR4MUSIC (HLDGS)  Digilife Technologies

Very poor diversification

The 3 months correlation between GEAR4MUSIC and Digilife is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Digilife Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digilife Technologies and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10 are associated (or correlated) with Digilife Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digilife Technologies has no effect on the direction of GEAR4MUSIC (HLDGS) i.e., GEAR4MUSIC (HLDGS) and Digilife Technologies go up and down completely randomly.

Pair Corralation between GEAR4MUSIC (HLDGS) and Digilife Technologies

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to generate 0.7 times more return on investment than Digilife Technologies. However, GEAR4MUSIC LS 10 is 1.42 times less risky than Digilife Technologies. It trades about -0.09 of its potential returns per unit of risk. Digilife Technologies Limited is currently generating about -0.08 per unit of risk. If you would invest  195.00  in GEAR4MUSIC LS 10 on November 30, 2024 and sell it today you would lose (28.00) from holding GEAR4MUSIC LS 10 or give up 14.36% of portfolio value over 90 days.

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

GEAR4MUSIC LS 10  vs.  Digilife Technologies Limited

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Digilife Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GEAR4MUSIC (HLDGS) and Digilife Technologies

The main advantage of trading using opposite GEAR4MUSIC (HLDGS) and Digilife Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC (HLDGS) position performs unexpectedly, Digilife Technologies 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 Digilife Technologies will offset losses from the drop in Digilife Technologies' long position.

The idea behind GEAR4MUSIC LS 10 and Digilife Technologies Limited 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.