Correlation Between MondayCom and DigitalOcean Holdings

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

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

Diversification Opportunities for MondayCom and DigitalOcean Holdings

0.78

Correlation Coefficient

MondayCom  DigitalOcean Holdings

Poor diversification

The 3 months correlation between MondayCom and DigitalOcean is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MondayCom and DigitalOcean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalOcean Holdings and MondayCom 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 MondayCom are associated (or correlated) with DigitalOcean Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalOcean Holdings has no effect on the direction of MondayCom i.e., MondayCom and DigitalOcean Holdings go up and down completely randomly.

Pair Corralation between MondayCom and DigitalOcean Holdings

Given the investment horizon of 90 days MondayCom is expected to generate 1.49 times more return on investment than DigitalOcean Holdings. However, MondayCom is 1.49 times more volatile than DigitalOcean Holdings. It trades about 0.05 of its potential returns per unit of risk. DigitalOcean Holdings is currently generating about 0.06 per unit of risk. If you would invest  27,470  in MondayCom on December 2, 2024 and sell it today you would earn a total of  2,207  from holding MondayCom or generate 8.03% return on investment over 90 days.

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

MondayCom  vs.  DigitalOcean Holdings

MondayCom

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MondayCom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, MondayCom showed solid returns over the last few months and may actually be approaching a breakup point.

DigitalOcean Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalOcean Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, DigitalOcean Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with MondayCom and DigitalOcean Holdings

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

The idea behind MondayCom and DigitalOcean 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.