Correlation Between Digital Imaging and J Steel

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

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

Diversification Opportunities for Digital Imaging and J Steel

-0.6

Correlation Coefficient

Digital Imaging  J Steel

Excellent diversification

The 3 months correlation between Digital and 023440 is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Digital Imaging Technology and J Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Steel and Digital Imaging 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 Digital Imaging Technology are associated (or correlated) with J Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Steel has no effect on the direction of Digital Imaging i.e., Digital Imaging and J Steel go up and down completely randomly.

Pair Corralation between Digital Imaging and J Steel

Assuming the 90 days trading horizon Digital Imaging Technology is expected to generate 1.04 times more return on investment than J Steel. However, Digital Imaging is 1.04 times more volatile than J Steel Co. It trades about 0.01 of its potential returns per unit of risk. J Steel Co is currently generating about 0.01 per unit of risk. If you would invest  1,907,000  in Digital Imaging Technology on October 26, 2024 and sell it today you would lose (83,000) from holding Digital Imaging Technology or give up 4.35% of portfolio value over 90 days.

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

Digital Imaging Technology  vs.  J Steel Co

Digital Imaging Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Imaging Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digital Imaging sustained solid returns over the last few months and may actually be approaching a breakup point.

J Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, J Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Digital Imaging and J Steel

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

The idea behind Digital Imaging Technology and J Steel Co 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.