Correlation Between Rama Steel and Digjam

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

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

Diversification Opportunities for Rama Steel and Digjam

0.55

Correlation Coefficient

Rama Steel  Digjam

Very weak diversification

The 3 months correlation between Rama and Digjam is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rama Steel Tubes and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Rama Steel 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 Rama Steel Tubes 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 Rama Steel i.e., Rama Steel and Digjam go up and down completely randomly.

Pair Corralation between Rama Steel and Digjam

Assuming the 90 days trading horizon Rama Steel Tubes is expected to generate 0.74 times more return on investment than Digjam. However, Rama Steel Tubes is 1.36 times less risky than Digjam. It trades about -0.33 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.92 per unit of risk. If you would invest  1,324  in Rama Steel Tubes on October 13, 2024 and sell it today you would lose (157.00) from holding Rama Steel Tubes or give up 11.86% of portfolio value over 90 days.

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

Rama Steel Tubes  vs.  Digjam Limited

Rama Steel Tubes

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Rama Steel and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rama Steel 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 Rama Steel Tubes 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.