Correlation Between Phibro Animal and Digital Turbine

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

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

Diversification Opportunities for Phibro Animal and Digital Turbine

0.8

Correlation Coefficient

Phibro Animal  Digital Turbine

Very poor diversification

The 3 months correlation between Phibro and Digital is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and Digital Turbine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Turbine and Phibro Animal 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 Phibro Animal Health are associated (or correlated) with Digital Turbine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Turbine has no effect on the direction of Phibro Animal i.e., Phibro Animal and Digital Turbine go up and down completely randomly.

Pair Corralation between Phibro Animal and Digital Turbine

Assuming the 90 days horizon Phibro Animal Health is expected to under-perform the Digital Turbine. But the stock apears to be less risky and, when comparing its historical volatility, Phibro Animal Health is 4.72 times less risky than Digital Turbine. The stock trades about -0.01 of its potential returns per unit of risk. The Digital Turbine is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  164.00  in Digital Turbine on December 20, 2024 and sell it today you would earn a total of  155.00  from holding Digital Turbine or generate 94.51% return on investment over 90 days.

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

Phibro Animal Health  vs.  Digital Turbine

Phibro Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phibro Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Phibro Animal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Digital Turbine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Turbine are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Digital Turbine reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phibro Animal and Digital Turbine

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

The idea behind Phibro Animal Health and Digital Turbine 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.