Correlation Between Wireless Telecom and Digi International

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

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

Diversification Opportunities for Wireless Telecom and Digi International

0.77

Correlation Coefficient

Wireless Telecom  Digi International

Poor diversification

The 3 months correlation between Wireless and Digi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wireless Telecom Group and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Wireless Telecom 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 Wireless Telecom Group 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 Wireless Telecom i.e., Wireless Telecom and Digi International go up and down completely randomly.

Pair Corralation between Wireless Telecom and Digi International

If you would invest  2,827  in Digi International on September 3, 2024 and sell it today you would earn a total of  495.00  from holding Digi International or generate 17.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Wireless Telecom Group  vs.  Digi International

Wireless Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wireless Telecom Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wireless Telecom is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Digi International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wireless Telecom and Digi International

The main advantage of trading using opposite Wireless Telecom and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wireless Telecom 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 Wireless Telecom Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.