Correlation Between Linedata Services and Digilife Technologies

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

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

Diversification Opportunities for Linedata Services and Digilife Technologies

0.71

Correlation Coefficient

Linedata Services  Digilife Technologies

Poor diversification

The 3 months correlation between Linedata and Digilife is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Linedata Services SA and Digilife Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digilife Technologies and Linedata Services 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 Linedata Services SA 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 Linedata Services i.e., Linedata Services and Digilife Technologies go up and down completely randomly.

Pair Corralation between Linedata Services and Digilife Technologies

Assuming the 90 days trading horizon Linedata Services SA is expected to generate 0.39 times more return on investment than Digilife Technologies. However, Linedata Services SA is 2.54 times less risky than Digilife Technologies. It trades about -0.02 of its potential returns per unit of risk. Digilife Technologies Limited is currently generating about -0.07 per unit of risk. If you would invest  8,100  in Linedata Services SA on December 24, 2024 and sell it today you would lose (240.00) from holding Linedata Services SA or give up 2.96% of portfolio value over 90 days.

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

Linedata Services SA  vs.  Digilife Technologies Limited

Linedata Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linedata Services SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Linedata Services is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Linedata Services and Digilife Technologies

The main advantage of trading using opposite Linedata Services and Digilife Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linedata Services 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 Linedata Services SA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.