Correlation Between Oil Country and Digjam

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

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

Diversification Opportunities for Oil Country and Digjam

-0.26

Correlation Coefficient

Oil Country  Digjam

Very good diversification

The 3 months correlation between Oil and Digjam is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Oil Country Tubular and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Oil Country 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 Oil Country Tubular 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 Oil Country i.e., Oil Country and Digjam go up and down completely randomly.

Pair Corralation between Oil Country and Digjam

Assuming the 90 days trading horizon Oil Country Tubular is expected to generate 0.74 times more return on investment than Digjam. However, Oil Country Tubular is 1.35 times less risky than Digjam. It trades about 0.2 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.54 per unit of risk. If you would invest  6,477  in Oil Country Tubular on October 10, 2024 and sell it today you would earn a total of  523.00  from holding Oil Country Tubular or generate 8.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Oil Country Tubular  vs.  Digjam Limited

Oil Country Tubular

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Country Tubular are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Oil Country displayed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady 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 Oil Country and Digjam

The main advantage of trading using opposite Oil Country and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Country 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 Oil Country Tubular 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.