Correlation Between SOUTHERN and Digi International

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

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

Diversification Opportunities for SOUTHERN and Digi International

-0.67

Correlation Coefficient

SOUTHERN  Digi International

Excellent diversification

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

Pair Corralation between SOUTHERN and Digi International

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to generate 0.34 times more return on investment than Digi International. However, SOUTHERN PER CORP is 2.94 times less risky than Digi International. It trades about 0.01 of its potential returns per unit of risk. Digi International is currently generating about 0.0 per unit of risk. If you would invest  11,728  in SOUTHERN PER CORP on September 23, 2024 and sell it today you would earn a total of  82.00  from holding SOUTHERN PER CORP or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.07%
Values	Daily Returns

SOUTHERN PER CORP  vs.  Digi International

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 SOUTHERN and Digi International

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

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.