Correlation Between TFI International and Digi International

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

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

Diversification Opportunities for TFI International and Digi International

0.67

Correlation Coefficient

TFI International  Digi International

Poor diversification

The 3 months correlation between TFI and Digi is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding TFI International and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and TFI International 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 TFI International 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 TFI International i.e., TFI International and Digi International go up and down completely randomly.

Pair Corralation between TFI International and Digi International

Given the investment horizon of 90 days TFI International is expected to generate 0.72 times more return on investment than Digi International. However, TFI International is 1.39 times less risky than Digi International. It trades about 0.05 of its potential returns per unit of risk. Digi International is currently generating about 0.0 per unit of risk. If you would invest  9,760  in TFI International on September 26, 2024 and sell it today you would earn a total of  4,375  from holding TFI International or generate 44.83% return on investment over 90 days.

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

TFI International  vs.  Digi International

TFI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TFI International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, TFI International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Digi International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFI International and Digi International

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

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.