Correlation Between Digi International and Credo Technology
Can any of the company-specific risk be diversified away by investing in both Digi International and Credo Technology 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 Digi International and Credo Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digi International and Credo Technology Group, you can compare the effects of market volatilities on Digi International and Credo Technology 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 Digi International with a short position of Credo Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and Credo Technology.
Diversification Opportunities for Digi International and Credo Technology
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Digi and Credo is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology and Digi International 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 Digi International are associated (or correlated) with Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Digi International i.e., Digi International and Credo Technology go up and down completely randomly.
Pair Corralation between Digi International and Credo Technology
Given the investment horizon of 90 days Digi International is expected to generate 1.56 times less return on investment than Credo Technology. But when comparing it to its historical volatility, Digi International is 1.67 times less risky than Credo Technology. It trades about 0.12 of its potential returns per unit of risk. Credo Technology Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,170 in Credo Technology Group on August 30, 2024 and sell it today you would earn a total of 401.00 from holding Credo Technology Group or generate 9.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digi International vs. Credo Technology Group
Performance |
| Timeline |
| Digi International |
| Credo Technology |
Digi International and Credo Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digi International and Credo Technology
The main advantage of trading using opposite Digi International and Credo Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International position performs unexpectedly, Credo Technology 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 Credo Technology will offset losses from the drop in Credo Technology's long position.| Digi International vs. Extreme Networks | Digi International vs. Ciena Corp | Digi International vs. Harmonic | Digi International vs. Comtech Telecommunications Corp |
| Credo Technology vs. Zebra Technologies | Credo Technology vs. Ubiquiti Networks | Credo Technology vs. Ciena Corp | Credo Technology vs. Clearfield |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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