Correlation Between KEY and DGTX

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

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

Diversification Opportunities for KEY and DGTX

-0.59

Correlation Coefficient

KEY  DGTX

Excellent diversification

The 3 months correlation between KEY and DGTX is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding KEY and DGTX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGTX and KEY 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 KEY are associated (or correlated) with DGTX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGTX has no effect on the direction of KEY i.e., KEY and DGTX go up and down completely randomly.

Pair Corralation between KEY and DGTX

Assuming the 90 days trading horizon KEY is expected to under-perform the DGTX. But the crypto coin apears to be less risky and, when comparing its historical volatility, KEY is 1.08 times less risky than DGTX. The crypto coin trades about -0.14 of its potential returns per unit of risk. The DGTX is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.01  in DGTX on September 1, 2024 and sell it today you would lose  0.00  from holding DGTX or give up 17.54% of portfolio value over 90 days.

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

KEY  vs.  DGTX

KEY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY 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 Crypto's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for KEY shareholders.

DGTX

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DGTX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, DGTX is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KEY and DGTX

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

The idea behind KEY and DGTX 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.