Correlation Between Digilife Technologies and STMICROELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Digilife Technologies and STMICROELECTRONICS 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 Digilife Technologies and STMICROELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digilife Technologies Limited and STMICROELECTRONICS, you can compare the effects of market volatilities on Digilife Technologies and STMICROELECTRONICS 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 Digilife Technologies with a short position of STMICROELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digilife Technologies and STMICROELECTRONICS.
Diversification Opportunities for Digilife Technologies and STMICROELECTRONICS
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Digilife and STMICROELECTRONICS is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Digilife Technologies Limited and STMICROELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMICROELECTRONICS and Digilife Technologies 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 Digilife Technologies Limited are associated (or correlated) with STMICROELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMICROELECTRONICS has no effect on the direction of Digilife Technologies i.e., Digilife Technologies and STMICROELECTRONICS go up and down completely randomly.
Pair Corralation between Digilife Technologies and STMICROELECTRONICS
Assuming the 90 days trading horizon Digilife Technologies Limited is expected to generate 2.21 times more return on investment than STMICROELECTRONICS. However, Digilife Technologies is 2.21 times more volatile than STMICROELECTRONICS. It trades about -0.01 of its potential returns per unit of risk. STMICROELECTRONICS is currently generating about -0.07 per unit of risk. If you would invest 119.00 in Digilife Technologies Limited on September 14, 2024 and sell it today you would lose (43.00) from holding Digilife Technologies Limited or give up 36.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digilife Technologies Limited vs. STMICROELECTRONICS
Performance |
| Timeline |
| Digilife Technologies |
| STMICROELECTRONICS |
Digilife Technologies and STMICROELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digilife Technologies and STMICROELECTRONICS
The main advantage of trading using opposite Digilife Technologies and STMICROELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digilife Technologies position performs unexpectedly, STMICROELECTRONICS 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 STMICROELECTRONICS will offset losses from the drop in STMICROELECTRONICS's long position.| Digilife Technologies vs. Superior Plus Corp | Digilife Technologies vs. SIVERS SEMICONDUCTORS AB | Digilife Technologies vs. Norsk Hydro ASA | Digilife Technologies vs. Reliance Steel Aluminum |
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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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