Correlation Between Science Applications and Applied Digital
Can any of the company-specific risk be diversified away by investing in both Science Applications and Applied Digital 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 Science Applications and Applied Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Applications International and Applied Digital, you can compare the effects of market volatilities on Science Applications and Applied Digital 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 Science Applications with a short position of Applied Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Applications and Applied Digital.
Diversification Opportunities for Science Applications and Applied Digital
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Science and Applied is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and Applied Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Digital and Science Applications 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 Science Applications International are associated (or correlated) with Applied Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Digital has no effect on the direction of Science Applications i.e., Science Applications and Applied Digital go up and down completely randomly.
Pair Corralation between Science Applications and Applied Digital
Given the investment horizon of 90 days Science Applications International is expected to under-perform the Applied Digital. But the stock apears to be less risky and, when comparing its historical volatility, Science Applications International is 6.84 times less risky than Applied Digital. The stock trades about -0.08 of its potential returns per unit of risk. The Applied Digital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 894.00 in Applied Digital on October 11, 2024 and sell it today you would lose (29.00) from holding Applied Digital or give up 3.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Science Applications Internati vs. Applied Digital
Performance |
| Timeline |
| Science Applications |
| Applied Digital |
Science Applications and Applied Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Applications and Applied Digital
The main advantage of trading using opposite Science Applications and Applied Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Applications position performs unexpectedly, Applied Digital 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 Applied Digital will offset losses from the drop in Applied Digital's long position.| Science Applications vs. CACI International | Science Applications vs. CDW Corp | Science Applications vs. Gartner | Science Applications vs. Jack Henry Associates |
| Applied Digital vs. Magic Empire Global | Applied Digital vs. Zhong Yang Financial | Applied Digital vs. Netcapital | Applied Digital vs. Lazard |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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