Correlation Between DigiCom Berhad and Small Cap

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

By analyzing existing cross correlation between DigiCom Berhad and Small Cap Premium, you can compare the effects of market volatilities on DigiCom Berhad and Small Cap 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 DigiCom Berhad with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of DigiCom Berhad and Small Cap.

Diversification Opportunities for DigiCom Berhad and Small Cap

0.45

Correlation Coefficient

DigiCom Berhad  Small Cap

Very weak diversification

The 3 months correlation between DigiCom and Small is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding DigiCom Berhad and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and DigiCom Berhad 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 DigiCom Berhad are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of DigiCom Berhad i.e., DigiCom Berhad and Small Cap go up and down completely randomly.

Pair Corralation between DigiCom Berhad and Small Cap

If you would invest  2,437  in Small Cap Premium on October 6, 2024 and sell it today you would earn a total of  19.00  from holding Small Cap Premium or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

DigiCom Berhad  vs.  Small Cap Premium

DigiCom Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DigiCom Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, DigiCom Berhad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Small Cap Premium

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DigiCom Berhad and Small Cap

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

The idea behind DigiCom Berhad and Small Cap Premium 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.