Correlation Between Doximity and DigitalOcean Holdings

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

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

Diversification Opportunities for Doximity and DigitalOcean Holdings

0.77

Correlation Coefficient

Doximity  DigitalOcean Holdings

Poor diversification

The 3 months correlation between Doximity and DigitalOcean is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Doximity and DigitalOcean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalOcean Holdings and Doximity 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 Doximity are associated (or correlated) with DigitalOcean Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalOcean Holdings has no effect on the direction of Doximity i.e., Doximity and DigitalOcean Holdings go up and down completely randomly.

Pair Corralation between Doximity and DigitalOcean Holdings

Given the investment horizon of 90 days Doximity is expected to generate 1.23 times more return on investment than DigitalOcean Holdings. However, Doximity is 1.23 times more volatile than DigitalOcean Holdings. It trades about 0.02 of its potential returns per unit of risk. DigitalOcean Holdings is currently generating about -0.05 per unit of risk. If you would invest  5,297  in Doximity on January 15, 2025 and sell it today you would lose (37.00) from holding Doximity or give up 0.7% of portfolio value over 90 days.

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

Doximity  vs.  DigitalOcean Holdings

Doximity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Doximity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, Doximity may actually be approaching a critical reversion point that can send shares even higher in May 2025.

DigitalOcean Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days DigitalOcean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Doximity and DigitalOcean Holdings

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

The idea behind Doximity and DigitalOcean Holdings 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.