Correlation Between DiGiSPICE Technologies and Hi Tech

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

By analyzing existing cross correlation between DiGiSPICE Technologies Limited and The Hi Tech Gears, you can compare the effects of market volatilities on DiGiSPICE Technologies and Hi Tech 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 DiGiSPICE Technologies with a short position of Hi Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of DiGiSPICE Technologies and Hi Tech.

Diversification Opportunities for DiGiSPICE Technologies and Hi Tech

0.82

Correlation Coefficient

DiGiSPICE Technologies  Hi Tech

Very poor diversification

The 3 months correlation between DiGiSPICE and HITECHGEAR is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding DiGiSPICE Technologies Limited and The Hi Tech Gears in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech and DiGiSPICE Technologies 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 DiGiSPICE Technologies Limited are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech has no effect on the direction of DiGiSPICE Technologies i.e., DiGiSPICE Technologies and Hi Tech go up and down completely randomly.

Pair Corralation between DiGiSPICE Technologies and Hi Tech

Assuming the 90 days trading horizon DiGiSPICE Technologies Limited is expected to under-perform the Hi Tech. In addition to that, DiGiSPICE Technologies is 1.09 times more volatile than The Hi Tech Gears. It trades about -0.15 of its total potential returns per unit of risk. The Hi Tech Gears is currently generating about -0.02 per unit of volatility. If you would invest  88,676  in The Hi Tech Gears on September 4, 2024 and sell it today you would lose (3,446) from holding The Hi Tech Gears or give up 3.89% of portfolio value over 90 days.

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

DiGiSPICE Technologies Limited  vs.  The Hi Tech Gears

DiGiSPICE Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DiGiSPICE Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DiGiSPICE Technologies and Hi Tech

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

The idea behind DiGiSPICE Technologies Limited and The Hi Tech Gears 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.