Correlation Between VINCI SA and Digital Locations

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

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

Diversification Opportunities for VINCI SA and Digital Locations

0.01

Correlation Coefficient

VINCI SA  Digital Locations

Significant diversification

The 3 months correlation between VINCI and Digital is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding VINCI SA and Digital Locations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Locations and VINCI SA 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 VINCI SA are associated (or correlated) with Digital Locations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Locations has no effect on the direction of VINCI SA i.e., VINCI SA and Digital Locations go up and down completely randomly.

Pair Corralation between VINCI SA and Digital Locations

Assuming the 90 days horizon VINCI SA is expected to under-perform the Digital Locations. But the pink sheet apears to be less risky and, when comparing its historical volatility, VINCI SA is 6.66 times less risky than Digital Locations. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Digital Locations is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Digital Locations on September 4, 2024 and sell it today you would lose (0.03) from holding Digital Locations or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

VINCI SA  vs.  Digital Locations

VINCI SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Digital Locations

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Digital Locations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Digital Locations may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VINCI SA and Digital Locations

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

The idea behind VINCI SA and Digital Locations 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.