Correlation Between Aban Offshore and Digjam

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

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

Diversification Opportunities for Aban Offshore and Digjam

0.89

Correlation Coefficient

Aban Offshore  Digjam

Very poor diversification

The 3 months correlation between Aban and Digjam is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aban Offshore Limited and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Aban Offshore 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 Aban Offshore Limited are associated (or correlated) with Digjam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digjam Limited has no effect on the direction of Aban Offshore i.e., Aban Offshore and Digjam go up and down completely randomly.

Pair Corralation between Aban Offshore and Digjam

Assuming the 90 days trading horizon Aban Offshore Limited is expected to generate 1.1 times more return on investment than Digjam. However, Aban Offshore is 1.1 times more volatile than Digjam Limited. It trades about -0.23 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.52 per unit of risk. If you would invest  6,475  in Aban Offshore Limited on December 1, 2024 and sell it today you would lose (2,449) from holding Aban Offshore Limited or give up 37.82% of portfolio value over 90 days.

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

Aban Offshore Limited  vs.  Digjam Limited

Aban Offshore Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Digjam Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aban Offshore and Digjam

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

The idea behind Aban Offshore Limited and Digjam Limited 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.