Correlation Between NVIDIA and Digi International

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

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

Diversification Opportunities for NVIDIA and Digi International

0.84

Correlation Coefficient

NVIDIA  Digi International

Very poor diversification

The 3 months correlation between NVIDIA and Digi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and Digi International go up and down completely randomly.

Pair Corralation between NVIDIA and Digi International

Given the investment horizon of 90 days NVIDIA is expected to under-perform the Digi International. In addition to that, NVIDIA is 1.39 times more volatile than Digi International. It trades about -0.07 of its total potential returns per unit of risk. Digi International is currently generating about 0.06 per unit of volatility. If you would invest  3,322  in Digi International on September 12, 2024 and sell it today you would earn a total of  67.00  from holding Digi International or generate 2.02% return on investment over 90 days.

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

NVIDIA  vs.  Digi International

NVIDIA

Risk-Adjusted Performance

9 of 100

OK

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

Digi International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 17 (%) 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.

Pair Trading with NVIDIA and Digi International

The main advantage of trading using opposite NVIDIA and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.