Correlation Between Digjam and Refex Industries

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

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

Diversification Opportunities for Digjam and Refex Industries

0.21

Correlation Coefficient

Digjam  Refex Industries

Modest diversification

The 3 months correlation between Digjam and Refex is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Digjam Limited and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries 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 Refex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Refex Industries has no effect on the direction of Digjam i.e., Digjam and Refex Industries go up and down completely randomly.

Pair Corralation between Digjam and Refex Industries

Assuming the 90 days trading horizon Digjam is expected to generate 3.68 times less return on investment than Refex Industries. In addition to that, Digjam is 1.02 times more volatile than Refex Industries Limited. It trades about 0.08 of its total potential returns per unit of risk. Refex Industries Limited is currently generating about 0.29 per unit of volatility. If you would invest  47,985  in Refex Industries Limited on September 5, 2024 and sell it today you would earn a total of  8,360  from holding Refex Industries Limited or generate 17.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Digjam Limited  vs.  Refex Industries Limited

Digjam Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digjam Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady primary indicators, Digjam may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Refex Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Refex Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digjam and Refex Industries

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

The idea behind Digjam Limited and Refex Industries 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.