Correlation Between Sudarshan Chemical and Digjam

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

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

Diversification Opportunities for Sudarshan Chemical and Digjam

-0.38

Correlation Coefficient

Sudarshan Chemical  Digjam

Very good diversification

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

Pair Corralation between Sudarshan Chemical and Digjam

Assuming the 90 days trading horizon Sudarshan Chemical Industries is expected to generate 0.63 times more return on investment than Digjam. However, Sudarshan Chemical Industries is 1.58 times less risky than Digjam. It trades about 0.28 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.39 per unit of risk. If you would invest  91,345  in Sudarshan Chemical Industries on October 22, 2024 and sell it today you would earn a total of  19,915  from holding Sudarshan Chemical Industries or generate 21.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sudarshan Chemical Industries  vs.  Digjam Limited

Sudarshan Chemical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, Sudarshan Chemical exhibited 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 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 Sudarshan Chemical and Digjam

The main advantage of trading using opposite Sudarshan Chemical and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sudarshan Chemical 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 Sudarshan Chemical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.