Correlation Between Digi Communications and Infinity Capital

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

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

Diversification Opportunities for Digi Communications and Infinity Capital

0.3

Correlation Coefficient

Digi Communications  Infinity Capital

Weak diversification

The 3 months correlation between Digi and Infinity is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Digi Communications NV and Infinity Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinity Capital Inv and Digi Communications 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 Digi Communications NV are associated (or correlated) with Infinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinity Capital Inv has no effect on the direction of Digi Communications i.e., Digi Communications and Infinity Capital go up and down completely randomly.

Pair Corralation between Digi Communications and Infinity Capital

Assuming the 90 days trading horizon Digi Communications is expected to generate 3.31 times less return on investment than Infinity Capital. But when comparing it to its historical volatility, Digi Communications NV is 1.08 times less risky than Infinity Capital. It trades about 0.07 of its potential returns per unit of risk. Infinity Capital Investments is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  206.00  in Infinity Capital Investments on August 23, 2024 and sell it today you would earn a total of  39.00  from holding Infinity Capital Investments or generate 18.93% return on investment over 90 days.

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

Digi Communications NV  vs.  Infinity Capital Investments

Digi Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Digi Communications NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Digi Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Infinity Capital Inv

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Infinity Capital Investments are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Infinity Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digi Communications and Infinity Capital

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

The idea behind Digi Communications NV and Infinity Capital Investments 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.