Correlation Between Digjam and Oil Country

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

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

Diversification Opportunities for Digjam and Oil Country

-0.67

Correlation Coefficient

Digjam  Oil Country

Excellent diversification

The 3 months correlation between Digjam and Oil is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Digjam Limited and Oil Country Tubular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Country Tubular and Digjam 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 Digjam Limited are associated (or correlated) with Oil Country. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Country Tubular has no effect on the direction of Digjam i.e., Digjam and Oil Country go up and down completely randomly.

Pair Corralation between Digjam and Oil Country

Assuming the 90 days trading horizon Digjam Limited is expected to under-perform the Oil Country. But the stock apears to be less risky and, when comparing its historical volatility, Digjam Limited is 1.0 times less risky than Oil Country. The stock trades about -0.21 of its potential returns per unit of risk. The Oil Country Tubular is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,988  in Oil Country Tubular on October 25, 2024 and sell it today you would earn a total of  2,194  from holding Oil Country Tubular or generate 43.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Digjam Limited  vs.  Oil Country Tubular

Digjam Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Oil Country Tubular

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Country Tubular are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Oil Country displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digjam and Oil Country

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

The idea behind Digjam Limited and Oil Country Tubular 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.