Correlation Between Digi International and FEDEX

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

By analyzing existing cross correlation between Digi International and FEDEX P 475, you can compare the effects of market volatilities on Digi International and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digi International and FEDEX.

Diversification Opportunities for Digi International and FEDEX

-0.64

Correlation Coefficient

Digi International  FEDEX

Excellent diversification

The 3 months correlation between Digi and FEDEX is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and FEDEX P 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 475 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 475 has no effect on the direction of Digi International i.e., Digi International and FEDEX go up and down completely randomly.

Pair Corralation between Digi International and FEDEX

Given the investment horizon of 90 days Digi International is expected to generate 1.41 times more return on investment than FEDEX. However, Digi International is 1.41 times more volatile than FEDEX P 475. It trades about 0.19 of its potential returns per unit of risk. FEDEX P 475 is currently generating about -0.07 per unit of risk. If you would invest  2,651  in Digi International on September 14, 2024 and sell it today you would earn a total of  682.00  from holding Digi International or generate 25.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Digi International  vs.  FEDEX P 475

Digi International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

FEDEX P 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digi International and FEDEX

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

The idea behind Digi International and FEDEX P 475 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .