Correlation Between Aba Chemicals and Digiwin Software

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

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

Diversification Opportunities for Aba Chemicals and Digiwin Software

0.86

Correlation Coefficient

Aba Chemicals  Digiwin Software

Very poor diversification

The 3 months correlation between Aba and Digiwin is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aba Chemicals Corp and Digiwin Software Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digiwin Software and Aba Chemicals 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 Aba Chemicals Corp are associated (or correlated) with Digiwin Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digiwin Software has no effect on the direction of Aba Chemicals i.e., Aba Chemicals and Digiwin Software go up and down completely randomly.

Pair Corralation between Aba Chemicals and Digiwin Software

Assuming the 90 days trading horizon Aba Chemicals is expected to generate 1.28 times less return on investment than Digiwin Software. But when comparing it to its historical volatility, Aba Chemicals Corp is 1.03 times less risky than Digiwin Software. It trades about 0.16 of its potential returns per unit of risk. Digiwin Software Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,638  in Digiwin Software Co on September 4, 2024 and sell it today you would earn a total of  1,294  from holding Digiwin Software Co or generate 79.0% return on investment over 90 days.

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

Aba Chemicals Corp  vs.  Digiwin Software Co

Aba Chemicals Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aba Chemicals Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aba Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

Digiwin Software

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digiwin Software Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Digiwin Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aba Chemicals and Digiwin Software

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

The idea behind Aba Chemicals Corp and Digiwin Software 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.