Correlation Between Alarm Holdings and Digital Turbine

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Can any of the company-specific risk be diversified away by investing in both Alarm Holdings and Digital Turbine 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 Alarm Holdings and Digital Turbine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alarm Holdings and Digital Turbine, you can compare the effects of market volatilities on Alarm Holdings and Digital Turbine 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 Alarm Holdings with a short position of Digital Turbine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alarm Holdings and Digital Turbine.

Diversification Opportunities for Alarm Holdings and Digital Turbine

-0.92
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Alarm and Digital is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alarm Holdings and Digital Turbine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Turbine and Alarm Holdings 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 Alarm Holdings are associated (or correlated) with Digital Turbine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Turbine has no effect on the direction of Alarm Holdings i.e., Alarm Holdings and Digital Turbine go up and down completely randomly.

Pair Corralation between Alarm Holdings and Digital Turbine

Given the investment horizon of 90 days Alarm Holdings is expected to generate 0.26 times more return on investment than Digital Turbine. However, Alarm Holdings is 3.89 times less risky than Digital Turbine. It trades about -0.19 of its potential returns per unit of risk. Digital Turbine is currently generating about -0.29 per unit of risk. If you would invest  7,538  in Alarm Holdings on December 29, 2023 and sell it today you would lose (291.00) from holding Alarm Holdings or give up 3.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alarm Holdings  vs.  Digital Turbine

 Performance 
       Timeline  
Alarm Holdings 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Alarm Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Alarm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.
Digital Turbine 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Digital Turbine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Alarm Holdings and Digital Turbine Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alarm Holdings and Digital Turbine

The main advantage of trading using opposite Alarm Holdings and Digital Turbine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alarm Holdings position performs unexpectedly, Digital Turbine 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 Digital Turbine will offset losses from the drop in Digital Turbine's long position.
The idea behind Alarm Holdings and Digital Turbine 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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