Correlation Between Digjam and Thomas Scott

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

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

Diversification Opportunities for Digjam and Thomas Scott

-0.16

Correlation Coefficient

Digjam  Thomas Scott

Good diversification

The 3 months correlation between Digjam and Thomas is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Digjam Limited and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott Limited 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 Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Digjam i.e., Digjam and Thomas Scott go up and down completely randomly.

Pair Corralation between Digjam and Thomas Scott

Assuming the 90 days trading horizon Digjam Limited is expected to under-perform the Thomas Scott. But the stock apears to be less risky and, when comparing its historical volatility, Digjam Limited is 1.4 times less risky than Thomas Scott. The stock trades about -0.07 of its potential returns per unit of risk. The Thomas Scott Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  26,647  in Thomas Scott Limited on September 24, 2024 and sell it today you would earn a total of  18,719  from holding Thomas Scott Limited or generate 70.25% return on investment over 90 days.

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

Digjam Limited  vs.  Thomas Scott Limited

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 latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Thomas Scott Limited

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digjam and Thomas Scott

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

The idea behind Digjam Limited and Thomas Scott 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.