Correlation Between Iteris and Digi International

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

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

Diversification Opportunities for Iteris and Digi International

0.12

Correlation Coefficient

Iteris  Digi International

Average diversification

The 3 months correlation between Iteris and Digi is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Iteris Inc and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Iteris 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 Iteris Inc 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 Iteris i.e., Iteris and Digi International go up and down completely randomly.

Pair Corralation between Iteris and Digi International

Considering the 90-day investment horizon Iteris Inc is expected to generate 83.47 times more return on investment than Digi International. However, Iteris is 83.47 times more volatile than Digi International. It trades about 0.19 of its potential returns per unit of risk. Digi International is currently generating about 0.08 per unit of risk. If you would invest  714.00  in Iteris Inc on September 30, 2024 and sell it today you would earn a total of  25,935  from holding Iteris Inc or generate 3632.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.88%
Values	Daily Returns

Iteris Inc  vs.  Digi International

Iteris Inc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Iteris Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady basic indicators, Iteris demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 Iteris and Digi International

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

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.