Correlation Between Skillz Platform and DigitalOcean Holdings

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

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

Diversification Opportunities for Skillz Platform and DigitalOcean Holdings

0.35

Correlation Coefficient

Skillz Platform  DigitalOcean Holdings

Weak diversification

The 3 months correlation between Skillz and DigitalOcean is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Skillz Platform and DigitalOcean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalOcean Holdings and Skillz Platform 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 Skillz Platform are associated (or correlated) with DigitalOcean Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalOcean Holdings has no effect on the direction of Skillz Platform i.e., Skillz Platform and DigitalOcean Holdings go up and down completely randomly.

Pair Corralation between Skillz Platform and DigitalOcean Holdings

Given the investment horizon of 90 days Skillz Platform is expected to under-perform the DigitalOcean Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Skillz Platform is 1.15 times less risky than DigitalOcean Holdings. The stock trades about -0.09 of its potential returns per unit of risk. The DigitalOcean Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,048  in DigitalOcean Holdings on September 15, 2024 and sell it today you would lose (235.00) from holding DigitalOcean Holdings or give up 5.81% of portfolio value over 90 days.

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

Skillz Platform  vs.  DigitalOcean Holdings

Skillz Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skillz Platform 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 essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DigitalOcean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Skillz Platform and DigitalOcean Holdings

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

The idea behind Skillz Platform and DigitalOcean Holdings 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.