Correlation Between Optical Cable and Digi International

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

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

Diversification Opportunities for Optical Cable and Digi International

-0.86

Correlation Coefficient

Optical Cable  Digi International

Pay attention - limited upside

The 3 months correlation between Optical and Digi is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Optical Cable 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 Optical Cable 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 Optical Cable i.e., Optical Cable and Digi International go up and down completely randomly.

Pair Corralation between Optical Cable and Digi International

Considering the 90-day investment horizon Optical Cable is expected to under-perform the Digi International. In addition to that, Optical Cable is 1.34 times more volatile than Digi International. It trades about -0.16 of its total potential returns per unit of risk. Digi International is currently generating about 0.2 per unit of volatility. If you would invest  2,660  in Digi International on September 13, 2024 and sell it today you would earn a total of  728.00  from holding Digi International or generate 27.37% return on investment over 90 days.

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

Optical Cable  vs.  Digi International

Optical Cable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optical Cable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Digi International

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optical Cable and Digi International

The main advantage of trading using opposite Optical Cable and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optical Cable 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 Optical Cable 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.