Correlation Between DigiByte and SXP

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

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

Diversification Opportunities for DigiByte and SXP

0.9

Correlation Coefficient

DigiByte  SXP

Almost no diversification

The 3 months correlation between DigiByte and SXP is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DigiByte and SXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SXP and DigiByte 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 DigiByte are associated (or correlated) with SXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SXP has no effect on the direction of DigiByte i.e., DigiByte and SXP go up and down completely randomly.

Pair Corralation between DigiByte and SXP

Assuming the 90 days trading horizon DigiByte is expected to generate 0.73 times more return on investment than SXP. However, DigiByte is 1.37 times less risky than SXP. It trades about 0.01 of its potential returns per unit of risk. SXP is currently generating about 0.0 per unit of risk. If you would invest  2.16  in DigiByte on January 17, 2024 and sell it today you would lose (0.89) from holding DigiByte or give up 41.2% of portfolio value over 90 days.

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

DigiByte  vs.  SXP

DigiByte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DigiByte are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, DigiByte exhibited solid returns over the last few months and may actually be approaching a breakup point.

SXP

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SXP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SXP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DigiByte and SXP

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

The idea behind DigiByte and SXP 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.