Correlation Between Rico Auto and Digjam

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

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

Diversification Opportunities for Rico Auto and Digjam

0.38

Correlation Coefficient

Rico Auto  Digjam

Weak diversification

The 3 months correlation between Rico and Digjam is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rico Auto Industries and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Rico Auto 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 Rico Auto Industries 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 Rico Auto i.e., Rico Auto and Digjam go up and down completely randomly.

Pair Corralation between Rico Auto and Digjam

Assuming the 90 days trading horizon Rico Auto Industries is expected to generate 1.25 times more return on investment than Digjam. However, Rico Auto is 1.25 times more volatile than Digjam Limited. It trades about -0.03 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.17 per unit of risk. If you would invest  10,734  in Rico Auto Industries on October 8, 2024 and sell it today you would lose (990.00) from holding Rico Auto Industries or give up 9.22% of portfolio value over 90 days.

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

Rico Auto Industries  vs.  Digjam Limited

Rico Auto Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rico Auto Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 weak 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 Rico Auto and Digjam

The main advantage of trading using opposite Rico Auto and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rico Auto 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 Rico Auto Industries 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.