Correlation Between Digi International and Harmonic

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

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

Diversification Opportunities for Digi International and Harmonic

-0.47

Correlation Coefficient

Digi International  Harmonic

Very good diversification

The 3 months correlation between Digi and Harmonic is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Harmonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmonic and Digi International 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 Digi International are associated (or correlated) with Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmonic has no effect on the direction of Digi International i.e., Digi International and Harmonic go up and down completely randomly.

Pair Corralation between Digi International and Harmonic

Given the investment horizon of 90 days Digi International is expected to generate 0.57 times more return on investment than Harmonic. However, Digi International is 1.76 times less risky than Harmonic. It trades about 0.12 of its potential returns per unit of risk. Harmonic is currently generating about -0.03 per unit of risk. If you would invest  2,827  in Digi International on August 31, 2024 and sell it today you would earn a total of  440.00  from holding Digi International or generate 15.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Digi International  vs.  Harmonic

Digi International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Harmonic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmonic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Digi International and Harmonic

The main advantage of trading using opposite Digi International and Harmonic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digi International position performs unexpectedly, Harmonic 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 Harmonic will offset losses from the drop in Harmonic's long position.

The idea behind Digi International and Harmonic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.