Correlation Between Small Cap and Digi International
Can any of the company-specific risk be diversified away by investing in both Small Cap and Digi International 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 Small Cap and Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Digi International, you can compare the effects of market volatilities on Small Cap and Digi International 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 Small Cap with a short position of Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Digi International.
Diversification Opportunities for Small Cap and Digi International
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Digi is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Small Cap 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 Small Cap Core are associated (or correlated) with Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Small Cap i.e., Small Cap and Digi International go up and down completely randomly.
Pair Corralation between Small Cap and Digi International
Assuming the 90 days horizon Small Cap is expected to generate 1.25 times less return on investment than Digi International. But when comparing it to its historical volatility, Small Cap Core is 1.57 times less risky than Digi International. It trades about 0.19 of its potential returns per unit of risk. Digi International is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,051 in Digi International on August 27, 2024 and sell it today you would earn a total of 244.00 from holding Digi International or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Digi International
Performance |
| Timeline |
| Small Cap Core |
| Digi International |
Small Cap and Digi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Digi International
The main advantage of trading using opposite Small Cap and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Digi International 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 International will offset losses from the drop in Digi International's long position.| Small Cap vs. Pro Blend Moderate Term | Small Cap vs. Hartford Moderate Allocation | Small Cap vs. Qs Moderate Growth | Small Cap vs. Dimensional Retirement Income |
| Digi International vs. Ichor Holdings | Digi International vs. Fabrinet | Digi International vs. Hello Group | Digi International vs. Ultra Clean Holdings |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |