Correlation Between Germina Agribusiness and Digi Communications

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

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

Diversification Opportunities for Germina Agribusiness and Digi Communications

0.44

Correlation Coefficient

Germina Agribusiness  Digi Communications

Very weak diversification

The 3 months correlation between Germina and Digi is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Germina Agribusiness SA and Digi Communications NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi Communications and Germina Agribusiness 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 Germina Agribusiness SA are associated (or correlated) with Digi Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi Communications has no effect on the direction of Germina Agribusiness i.e., Germina Agribusiness and Digi Communications go up and down completely randomly.

Pair Corralation between Germina Agribusiness and Digi Communications

Assuming the 90 days trading horizon Germina Agribusiness is expected to generate 1.58 times less return on investment than Digi Communications. In addition to that, Germina Agribusiness is 2.41 times more volatile than Digi Communications NV. It trades about 0.03 of its total potential returns per unit of risk. Digi Communications NV is currently generating about 0.11 per unit of volatility. If you would invest  4,434  in Digi Communications NV on October 7, 2024 and sell it today you would earn a total of  1,966  from holding Digi Communications NV or generate 44.34% return on investment over 90 days.

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

Germina Agribusiness SA  vs.  Digi Communications NV

Germina Agribusiness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Germina Agribusiness SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Germina Agribusiness is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Digi Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digi Communications NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Digi Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Germina Agribusiness and Digi Communications

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

The idea behind Germina Agribusiness SA and Digi Communications NV 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.