Correlation Between Alpha and Digi International

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

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

Diversification Opportunities for Alpha and Digi International

0.8

Correlation Coefficient

Alpha  Digi International

Very poor diversification

The 3 months correlation between Alpha and Digi is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International and Alpha 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 Alpha and Omega 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 Alpha i.e., Alpha and Digi International go up and down completely randomly.

Pair Corralation between Alpha and Digi International

Given the investment horizon of 90 days Alpha and Omega is expected to generate 1.4 times more return on investment than Digi International. However, Alpha is 1.4 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 0.14 per unit of risk. If you would invest  1,910  in Alpha and Omega on April 29, 2025 and sell it today you would earn a total of  819.00  from holding Alpha and Omega or generate 42.88% return on investment over 90 days.

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

Alpha and Omega  vs.  Digi International

Alpha and Omega

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Digi International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digi International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Digi International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha and Digi International

The main advantage of trading using opposite Alpha and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha 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 Alpha and Omega 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.