Correlation Between Peer To and DigitalTown

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

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

Diversification Opportunities for Peer To and DigitalTown

0.0

Correlation Coefficient

Peer To  DigitalTown

Pay attention - limited upside

The 3 months correlation between Peer and DigitalTown is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Peer To Peer and DigitalTown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalTown and Peer To 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 Peer To Peer are associated (or correlated) with DigitalTown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalTown has no effect on the direction of Peer To i.e., Peer To and DigitalTown go up and down completely randomly.

Pair Corralation between Peer To and DigitalTown

If you would invest  0.03  in Peer To Peer on September 24, 2024 and sell it today you would lose (0.01) from holding Peer To Peer or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Peer To Peer  vs.  DigitalTown

Peer To Peer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peer To Peer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Peer To reported solid returns over the last few months and may actually be approaching a breakup point.

DigitalTown

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigitalTown has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, DigitalTown is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Peer To and DigitalTown

The main advantage of trading using opposite Peer To and DigitalTown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peer To position performs unexpectedly, DigitalTown 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 DigitalTown will offset losses from the drop in DigitalTown's long position.

The idea behind Peer To Peer and DigitalTown 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.