Correlation Between Gujarat Fluorochemicals and Digjam

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

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

Diversification Opportunities for Gujarat Fluorochemicals and Digjam

0.06

Correlation Coefficient

Gujarat Fluorochemicals  Digjam

Significant diversification

The 3 months correlation between Gujarat and Digjam is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited are associated (or correlated) with Digjam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digjam Limited has no effect on the direction of Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and Digjam go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and Digjam

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 0.98 times more return on investment than Digjam. However, Gujarat Fluorochemicals Limited is 1.02 times less risky than Digjam. It trades about 0.05 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.04 per unit of risk. If you would invest  283,054  in Gujarat Fluorochemicals Limited on October 7, 2024 and sell it today you would earn a total of  130,001  from holding Gujarat Fluorochemicals Limited or generate 45.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Gujarat Fluorochemicals Limite  vs.  Digjam Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Gujarat Fluorochemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 uncertain 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.

Pair Trading with Gujarat Fluorochemicals and Digjam

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

The idea behind Gujarat Fluorochemicals Limited and Digjam 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.