Correlation Between Digi International and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Digi International and NETGEAR 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 NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digi International and NETGEAR, you can compare the effects of market volatilities on Digi International and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and NETGEAR.
Diversification Opportunities for Digi International and NETGEAR
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Digi and NETGEAR is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Digi International i.e., Digi International and NETGEAR go up and down completely randomly.
Pair Corralation between Digi International and NETGEAR
Given the investment horizon of 90 days Digi International is expected to generate 0.87 times more return on investment than NETGEAR. However, Digi International is 1.14 times less risky than NETGEAR. It trades about 0.12 of its potential returns per unit of risk. NETGEAR is currently generating about 0.06 per unit of risk. 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digi International vs. NETGEAR
Performance |
| Timeline |
| Digi International |
| NETGEAR |
Digi International and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digi International and NETGEAR
The main advantage of trading using opposite Digi International and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| Digi International vs. Extreme Networks | Digi International vs. Ciena Corp | Digi International vs. Harmonic | Digi International vs. Comtech Telecommunications Corp |
| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG ADR |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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