Correlation Between ES Ceramics and Digistar Bhd

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

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

Diversification Opportunities for ES Ceramics and Digistar Bhd

-0.25

Correlation Coefficient

ES Ceramics  Digistar Bhd

Very good diversification

The 3 months correlation between 0100 and Digistar is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ES Ceramics Technology and Digistar Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digistar Bhd and ES Ceramics 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 ES Ceramics Technology are associated (or correlated) with Digistar Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digistar Bhd has no effect on the direction of ES Ceramics i.e., ES Ceramics and Digistar Bhd go up and down completely randomly.

Pair Corralation between ES Ceramics and Digistar Bhd

Assuming the 90 days trading horizon ES Ceramics Technology is expected to under-perform the Digistar Bhd. But the stock apears to be less risky and, when comparing its historical volatility, ES Ceramics Technology is 1.74 times less risky than Digistar Bhd. The stock trades about -0.06 of its potential returns per unit of risk. The Digistar Bhd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.50  in Digistar Bhd on September 3, 2024 and sell it today you would earn a total of  0.50  from holding Digistar Bhd or generate 9.09% return on investment over 90 days.

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

ES Ceramics Technology  vs.  Digistar Bhd

ES Ceramics Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ES Ceramics Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Digistar Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digistar Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Digistar Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ES Ceramics and Digistar Bhd

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

The idea behind ES Ceramics Technology and Digistar Bhd 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.