Correlation Between Western India and Digjam

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

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

Diversification Opportunities for Western India and Digjam

-0.52

Correlation Coefficient

Western India  Digjam

Excellent diversification

The 3 months correlation between Western and Digjam is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Western India and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Western India 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 The Western India 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 Western India i.e., Western India and Digjam go up and down completely randomly.

Pair Corralation between Western India and Digjam

Assuming the 90 days trading horizon The Western India is expected to generate 1.16 times more return on investment than Digjam. However, Western India is 1.16 times more volatile than Digjam Limited. It trades about 0.06 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.04 per unit of risk. If you would invest  18,091  in The Western India on October 6, 2024 and sell it today you would earn a total of  5,827  from holding The Western India or generate 32.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

The Western India  vs.  Digjam Limited

Western India

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Western India are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Western India unveiled 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 Western India and Digjam

The main advantage of trading using opposite Western India and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western India 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 The Western India 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.