Correlation Between Aldel Financial and Digi International

Can any of the company-specific risk be diversified away by investing in both Aldel Financial 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 Aldel Financial and Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldel Financial II and Digi International, you can compare the effects of market volatilities on Aldel Financial 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 Aldel Financial with a short position of Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Digi International.

Diversification Opportunities for Aldel Financial and Digi International

-0.39

Correlation Coefficient

Aldel Financial  Digi International

Very good diversification

The 3 months correlation between Aldel and Digi is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Digi International go up and down completely randomly.

Pair Corralation between Aldel Financial and Digi International

Assuming the 90 days horizon Aldel Financial is expected to generate 24.96 times less return on investment than Digi International. But when comparing it to its historical volatility, Aldel Financial II is 19.63 times less risky than Digi International. It trades about 0.08 of its potential returns per unit of risk. Digi International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,693  in Digi International on September 23, 2024 and sell it today you would earn a total of  381.00  from holding Digi International or generate 14.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.69%
Values	Daily Returns

Aldel Financial II  vs.  Digi International

Aldel Financial II

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Digi International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aldel Financial and Digi International

The main advantage of trading using opposite Aldel Financial and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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.

The idea behind Aldel Financial II and Digi International 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.