Correlation Between Minerals Technologies and Digi International

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

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

Diversification Opportunities for Minerals Technologies and Digi International

0.81

Correlation Coefficient

Minerals Technologies  Digi International

Very poor diversification

The 3 months correlation between Minerals and Digi is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Minerals Technologies 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 Minerals Technologies are associated (or correlated) with Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Minerals Technologies i.e., Minerals Technologies and Digi International go up and down completely randomly.

Pair Corralation between Minerals Technologies and Digi International

Considering the 90-day investment horizon Minerals Technologies is expected to under-perform the Digi International. But the stock apears to be less risky and, when comparing its historical volatility, Minerals Technologies is 1.41 times less risky than Digi International. The stock trades about -0.32 of its potential returns per unit of risk. The Digi International is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  3,295  in Digi International on September 23, 2024 and sell it today you would lose (221.00) from holding Digi International or give up 6.71% of portfolio value over 90 days.

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

Minerals Technologies  vs.  Digi International

Minerals Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Minerals Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Digi International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Minerals Technologies and Digi International

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

The idea behind Minerals Technologies and Digi International 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.