Correlation Between Diligent Media and Fairchem Organics

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

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

Diversification Opportunities for Diligent Media and Fairchem Organics

0.26

Correlation Coefficient

Diligent Media  Fairchem Organics

Modest diversification

The 3 months correlation between Diligent and Fairchem is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Diligent Media and Fairchem Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairchem Organics and Diligent Media 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 Diligent Media are associated (or correlated) with Fairchem Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairchem Organics has no effect on the direction of Diligent Media i.e., Diligent Media and Fairchem Organics go up and down completely randomly.

Pair Corralation between Diligent Media and Fairchem Organics

Assuming the 90 days trading horizon Diligent Media is expected to generate 0.8 times more return on investment than Fairchem Organics. However, Diligent Media is 1.26 times less risky than Fairchem Organics. It trades about 0.08 of its potential returns per unit of risk. Fairchem Organics Limited is currently generating about 0.04 per unit of risk. If you would invest  524.00  in Diligent Media on October 8, 2024 and sell it today you would earn a total of  80.00  from holding Diligent Media or generate 15.27% return on investment over 90 days.

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

Diligent Media  vs.  Fairchem Organics Limited

Diligent Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Diligent Media demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Fairchem Organics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fairchem Organics Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Fairchem Organics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Diligent Media and Fairchem Organics

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

The idea behind Diligent Media and Fairchem Organics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.