Correlation Between Digilife Technologies and Brown-Forman Corp

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

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

Diversification Opportunities for Digilife Technologies and Brown-Forman Corp

0.7

Correlation Coefficient

Digilife Technologies  Brown-Forman Corp

Poor diversification

The 3 months correlation between Digilife and Brown-Forman is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Digilife Technologies Limited and Brown Forman Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman Corp and Digilife 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 Digilife Technologies Limited are associated (or correlated) with Brown-Forman Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman Corp has no effect on the direction of Digilife Technologies i.e., Digilife Technologies and Brown-Forman Corp go up and down completely randomly.

Pair Corralation between Digilife Technologies and Brown-Forman Corp

Assuming the 90 days trading horizon Digilife Technologies Limited is expected to under-perform the Brown-Forman Corp. In addition to that, Digilife Technologies is 1.65 times more volatile than Brown Forman Corp. It trades about -0.08 of its total potential returns per unit of risk. Brown Forman Corp is currently generating about -0.11 per unit of volatility. If you would invest  3,833  in Brown Forman Corp on December 22, 2024 and sell it today you would lose (627.00) from holding Brown Forman Corp or give up 16.36% of portfolio value over 90 days.

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

Digilife Technologies Limited  vs.  Brown Forman Corp

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.

Brown Forman Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Digilife Technologies and Brown-Forman Corp

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

The idea behind Digilife Technologies Limited and Brown Forman Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.