Correlation Between Belden and Digi International
Can any of the company-specific risk be diversified away by investing in both Belden 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 Belden and Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Belden Inc and Digi International, you can compare the effects of market volatilities on Belden 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 Belden with a short position of Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belden and Digi International.
Diversification Opportunities for Belden and Digi International
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Belden and Digi is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Belden 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 Belden Inc 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 Belden i.e., Belden and Digi International go up and down completely randomly.
Pair Corralation between Belden and Digi International
Considering the 90-day investment horizon Belden is expected to generate 1.25 times less return on investment than Digi International. But when comparing it to its historical volatility, Belden Inc is 1.18 times less risky than Digi International. It trades about 0.12 of its potential returns per unit of risk. Digi International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,931 in Digi International on November 2, 2024 and sell it today you would earn a total of 141.00 from holding Digi International or generate 4.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Belden Inc vs. Digi International
Performance |
| Timeline |
| Belden Inc |
| Digi International |
Belden and Digi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Belden and Digi International
The main advantage of trading using opposite Belden and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belden 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 Belden Inc 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.| Digi International vs. Extreme Networks | Digi International vs. Ciena Corp | Digi International vs. Harmonic | Digi International vs. Comtech Telecommunications Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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