Correlation Between Credo Technology and Digi International

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Can any of the company-specific risk be diversified away by investing in both Credo Technology 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 Credo Technology and Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credo Technology Group and Digi International, you can compare the effects of market volatilities on Credo Technology 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 Credo Technology with a short position of Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credo Technology and Digi International.

Diversification Opportunities for Credo Technology and Digi International

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Credo and Digi is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Credo Technology Group and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Credo Technology 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 Credo Technology 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 Credo Technology i.e., Credo Technology and Digi International go up and down completely randomly.

Pair Corralation between Credo Technology and Digi International

Given the investment horizon of 90 days Credo Technology Group is expected to generate 1.75 times more return on investment than Digi International. However, Credo Technology is 1.75 times more volatile than Digi International. It trades about 0.16 of its potential returns per unit of risk. Digi International is currently generating about 0.15 per unit of risk. If you would invest  4,014  in Credo Technology Group on August 27, 2024 and sell it today you would earn a total of  570.00  from holding Credo Technology Group or generate 14.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Credo Technology Group  vs.  Digi International

 Performance 
       Timeline  
Credo Technology 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Credo Technology Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Credo Technology displayed solid returns over the last few months and may actually be approaching a breakup point.
Digi International 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 7 (%) 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.

Credo Technology and Digi International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Credo Technology and Digi International

The main advantage of trading using opposite Credo Technology and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credo Technology 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 Credo Technology 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.
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 Stocks Directory module to find actively traded stocks across global markets.

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