Correlation Between Independence Realty and Digi International

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

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

Diversification Opportunities for Independence Realty and Digi International

0.71

Correlation Coefficient

Independence Realty  Digi International

Poor diversification

The 3 months correlation between Independence and Digi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Independence Realty 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 Independence Realty Trust 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 Independence Realty i.e., Independence Realty and Digi International go up and down completely randomly.

Pair Corralation between Independence Realty and Digi International

Considering the 90-day investment horizon Independence Realty Trust is expected to under-perform the Digi International. But the stock apears to be less risky and, when comparing its historical volatility, Independence Realty Trust is 1.58 times less risky than Digi International. The stock trades about -0.02 of its potential returns per unit of risk. The Digi International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,753  in Digi International on September 29, 2024 and sell it today you would earn a total of  287.00  from holding Digi International or generate 10.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Independence Realty Trust  vs.  Digi International

Independence Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independence Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Digi International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Digi International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Independence Realty and Digi International

The main advantage of trading using opposite Independence Realty and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Realty 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 Independence Realty Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.