Correlation Between Perma-Fix Environmental and Digilife Technologies

Can any of the company-specific risk be diversified away by investing in both Perma-Fix Environmental and Digilife Technologies 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 Perma-Fix Environmental and Digilife Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Perma Fix Environmental Services and Digilife Technologies Limited, you can compare the effects of market volatilities on Perma-Fix Environmental and Digilife Technologies 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 Perma-Fix Environmental with a short position of Digilife Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perma-Fix Environmental and Digilife Technologies.

Diversification Opportunities for Perma-Fix Environmental and Digilife Technologies

0.16

Correlation Coefficient

Perma-Fix Environmental  Digilife Technologies

Average diversification

The 3 months correlation between Perma-Fix and Digilife is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Perma Fix Environmental Servic and Digilife Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digilife Technologies and Perma-Fix Environmental 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 Perma Fix Environmental Services are associated (or correlated) with Digilife Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digilife Technologies has no effect on the direction of Perma-Fix Environmental i.e., Perma-Fix Environmental and Digilife Technologies go up and down completely randomly.

Pair Corralation between Perma-Fix Environmental and Digilife Technologies

Assuming the 90 days trading horizon Perma Fix Environmental Services is expected to under-perform the Digilife Technologies. In addition to that, Perma-Fix Environmental is 1.75 times more volatile than Digilife Technologies Limited. It trades about -0.34 of its total potential returns per unit of risk. Digilife Technologies Limited is currently generating about 0.04 per unit of volatility. If you would invest  75.00  in Digilife Technologies Limited on September 23, 2024 and sell it today you would earn a total of  1.00  from holding Digilife Technologies Limited or generate 1.33% return on investment over 90 days.

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

Perma Fix Environmental Servic  vs.  Digilife Technologies Limited

Perma Fix Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Digilife Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Digilife Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Perma-Fix Environmental and Digilife Technologies

The main advantage of trading using opposite Perma-Fix Environmental and Digilife Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perma-Fix Environmental position performs unexpectedly, Digilife Technologies 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 Digilife Technologies will offset losses from the drop in Digilife Technologies' long position.

The idea behind Perma Fix Environmental Services and Digilife Technologies Limited 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.