Correlation Between Digi International and Ubisoft Entertainment

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

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

Diversification Opportunities for Digi International and Ubisoft Entertainment

-0.34

Correlation Coefficient

Digi International  Ubisoft Entertainment

Very good diversification

The 3 months correlation between Digi and Ubisoft is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Digi International and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment and Digi International 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 International are associated (or correlated) with Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Digi International i.e., Digi International and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between Digi International and Ubisoft Entertainment

Given the investment horizon of 90 days Digi International is expected to under-perform the Ubisoft Entertainment. In addition to that, Digi International is 2.24 times more volatile than Ubisoft Entertainment. It trades about -0.13 of its total potential returns per unit of risk. Ubisoft Entertainment is currently generating about 0.21 per unit of volatility. If you would invest  2,199  in Ubisoft Entertainment on February 11, 2024 and sell it today you would earn a total of  188.00  from holding Ubisoft Entertainment or generate 8.55% return on investment over 90 days.

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

Digi International  vs.  Ubisoft Entertainment

Digi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Ubisoft Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Ubisoft Entertainment may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Digi International and Ubisoft Entertainment

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

The idea behind Digi International and Ubisoft Entertainment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.