Correlation Between Ciena Corp and Digi International
Can any of the company-specific risk be diversified away by investing in both Ciena Corp 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 Ciena Corp and Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ciena Corp and Digi International, you can compare the effects of market volatilities on Ciena Corp 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 Ciena Corp with a short position of Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ciena Corp and Digi International.
Diversification Opportunities for Ciena Corp and Digi International
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ciena and Digi is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Ciena Corp 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 Ciena 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 Ciena Corp i.e., Ciena Corp and Digi International go up and down completely randomly.
Pair Corralation between Ciena Corp and Digi International
Given the investment horizon of 90 days Ciena Corp is expected to generate 1.1 times less return on investment than Digi International. But when comparing it to its historical volatility, Ciena Corp is 1.3 times less risky than Digi International. It trades about 0.22 of its potential returns per unit of risk. Digi International is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,051 in Digi International on August 28, 2024 and sell it today you would earn a total of 313.00 from holding Digi International or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ciena Corp vs. Digi International
Performance |
| Timeline |
| Ciena Corp |
| Digi International |
Ciena Corp and Digi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ciena Corp and Digi International
The main advantage of trading using opposite Ciena Corp and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ciena Corp 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.| Ciena Corp vs. Ichor Holdings | Ciena Corp vs. Fabrinet | Ciena Corp vs. Hello Group | Ciena Corp vs. Ultra Clean Holdings |
| Digi International vs. Ichor Holdings | Digi International vs. Fabrinet | Digi International vs. Hello Group | Digi International vs. Ultra Clean Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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