Correlation Between Indian Overseas and DiGiSPICE Technologies

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

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

Diversification Opportunities for Indian Overseas and DiGiSPICE Technologies

0.9

Correlation Coefficient

Indian Overseas  DiGiSPICE Technologies

Almost no diversification

The 3 months correlation between Indian and DiGiSPICE is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Indian Overseas Bank and DiGiSPICE Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiGiSPICE Technologies and Indian Overseas 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 Indian Overseas Bank are associated (or correlated) with DiGiSPICE Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiGiSPICE Technologies has no effect on the direction of Indian Overseas i.e., Indian Overseas and DiGiSPICE Technologies go up and down completely randomly.

Pair Corralation between Indian Overseas and DiGiSPICE Technologies

Assuming the 90 days trading horizon Indian Overseas Bank is expected to generate 0.88 times more return on investment than DiGiSPICE Technologies. However, Indian Overseas Bank is 1.14 times less risky than DiGiSPICE Technologies. It trades about -0.07 of its potential returns per unit of risk. DiGiSPICE Technologies Limited is currently generating about -0.23 per unit of risk. If you would invest  5,058  in Indian Overseas Bank on December 28, 2024 and sell it today you would lose (883.00) from holding Indian Overseas Bank or give up 17.46% of portfolio value over 90 days.

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

Indian Overseas Bank  vs.  DiGiSPICE Technologies Limited

Indian Overseas Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indian Overseas Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

DiGiSPICE Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days DiGiSPICE Technologies 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 forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Indian Overseas and DiGiSPICE Technologies

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

The idea behind Indian Overseas Bank and DiGiSPICE Technologies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.