Correlation Between Shopify and Digital Turbine

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

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

Diversification Opportunities for Shopify and Digital Turbine

0.52

Correlation Coefficient

Shopify  Digital Turbine

Very weak diversification

The 3 months correlation between Shopify and Digital is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Digital Turbine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Turbine and Shopify 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 Shopify 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 Shopify i.e., Shopify and Digital Turbine go up and down completely randomly.

Pair Corralation between Shopify and Digital Turbine

Given the investment horizon of 90 days Shopify is expected to generate 0.59 times more return on investment than Digital Turbine. However, Shopify is 1.7 times less risky than Digital Turbine. It trades about -0.13 of its potential returns per unit of risk. Digital Turbine is currently generating about -0.11 per unit of risk. If you would invest  11,083  in Shopify on December 29, 2024 and sell it today you would lose (1,415) from holding Shopify or give up 12.77% of portfolio value over 90 days.

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

Shopify  vs.  Digital Turbine

Shopify

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Digital Turbine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Turbine are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Digital Turbine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shopify and Digital Turbine

The main advantage of trading using opposite Shopify and Digital Turbine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify 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 Shopify 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.