Correlation Between IAR SA and Digi Communications
Can any of the company-specific risk be diversified away by investing in both IAR SA and Digi Communications 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 IAR SA and Digi Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IAR SA and Digi Communications NV, you can compare the effects of market volatilities on IAR SA and Digi Communications 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 IAR SA with a short position of Digi Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR SA and Digi Communications.
Diversification Opportunities for IAR SA and Digi Communications
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IAR and Digi is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding IAR SA and Digi Communications NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi Communications and IAR SA 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 IAR SA are associated (or correlated) with Digi Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi Communications has no effect on the direction of IAR SA i.e., IAR SA and Digi Communications go up and down completely randomly.
Pair Corralation between IAR SA and Digi Communications
Assuming the 90 days trading horizon IAR SA is expected to generate 1.98 times less return on investment than Digi Communications. In addition to that, IAR SA is 1.33 times more volatile than Digi Communications NV. It trades about 0.04 of its total potential returns per unit of risk. Digi Communications NV is currently generating about 0.12 per unit of volatility. If you would invest 3,155 in Digi Communications NV on August 30, 2024 and sell it today you would earn a total of 3,325 from holding Digi Communications NV or generate 105.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAR SA vs. Digi Communications NV
Performance |
| Timeline |
| IAR SA |
| Digi Communications |
IAR SA and Digi Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAR SA and Digi Communications
The main advantage of trading using opposite IAR SA and Digi Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR SA position performs unexpectedly, Digi Communications 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 Communications will offset losses from the drop in Digi Communications' long position.The idea behind IAR SA and Digi Communications NV 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 Communications vs. Teraplast Bist | Digi Communications vs. Electroarges S | Digi Communications vs. Comvex SA | Digi Communications vs. IAR SA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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