Correlation Between Global E and DigitalOcean Holdings

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Can any of the company-specific risk be diversified away by investing in both Global E and DigitalOcean Holdings 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 Global E and DigitalOcean Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and DigitalOcean Holdings, you can compare the effects of market volatilities on Global E and DigitalOcean Holdings 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 Global E with a short position of DigitalOcean Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and DigitalOcean Holdings.

Diversification Opportunities for Global E and DigitalOcean Holdings

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Global and DigitalOcean is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and DigitalOcean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalOcean Holdings and Global E 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 Global E Online are associated (or correlated) with DigitalOcean Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalOcean Holdings has no effect on the direction of Global E i.e., Global E and DigitalOcean Holdings go up and down completely randomly.

Pair Corralation between Global E and DigitalOcean Holdings

Given the investment horizon of 90 days Global E Online is expected to generate 0.77 times more return on investment than DigitalOcean Holdings. However, Global E Online is 1.29 times less risky than DigitalOcean Holdings. It trades about 0.3 of its potential returns per unit of risk. DigitalOcean Holdings is currently generating about 0.05 per unit of risk. If you would invest  3,324  in Global E Online on September 1, 2024 and sell it today you would earn a total of  1,904  from holding Global E Online or generate 57.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Global E Online  vs.  DigitalOcean Holdings

 Performance 
       Timeline  
Global E Online 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.
DigitalOcean Holdings 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in DigitalOcean Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, DigitalOcean Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Global E and DigitalOcean Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global E and DigitalOcean Holdings

The main advantage of trading using opposite Global E and DigitalOcean Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E position performs unexpectedly, DigitalOcean Holdings 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 DigitalOcean Holdings will offset losses from the drop in DigitalOcean Holdings' long position.
The idea behind Global E Online and DigitalOcean Holdings 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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