Correlation Between Locafy and DGTL Holdings

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

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

Diversification Opportunities for Locafy and DGTL Holdings

-0.36

Correlation Coefficient

Locafy  DGTL Holdings

Very good diversification

The 3 months correlation between Locafy and DGTL is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Locafy Limited and DGTL Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGTL Holdings and Locafy 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 Locafy Limited are associated (or correlated) with DGTL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGTL Holdings has no effect on the direction of Locafy i.e., Locafy and DGTL Holdings go up and down completely randomly.

Pair Corralation between Locafy and DGTL Holdings

Assuming the 90 days horizon Locafy is expected to generate 3.17 times less return on investment than DGTL Holdings. But when comparing it to its historical volatility, Locafy Limited is 6.94 times less risky than DGTL Holdings. It trades about 0.2 of its potential returns per unit of risk. DGTL Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5.19  in DGTL Holdings on September 4, 2024 and sell it today you would lose (3.19) from holding DGTL Holdings or give up 61.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.43%
Values	Daily Returns

Locafy Limited  vs.  DGTL Holdings

Locafy Limited

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

DGTL Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DGTL Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, DGTL Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Locafy and DGTL Holdings

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

The idea behind Locafy Limited and DGTL Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.