Correlation Between Digistar Bhd and Alliance Financial

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

By analyzing existing cross correlation between Digistar Bhd and Alliance Financial Group, you can compare the effects of market volatilities on Digistar Bhd and Alliance Financial 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 Digistar Bhd with a short position of Alliance Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digistar Bhd and Alliance Financial.

Diversification Opportunities for Digistar Bhd and Alliance Financial

0.05

Correlation Coefficient

Digistar Bhd  Alliance Financial

Significant diversification

The 3 months correlation between Digistar and Alliance is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Digistar Bhd and Alliance Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Financial and Digistar Bhd 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 Digistar Bhd are associated (or correlated) with Alliance Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Financial has no effect on the direction of Digistar Bhd i.e., Digistar Bhd and Alliance Financial go up and down completely randomly.

Pair Corralation between Digistar Bhd and Alliance Financial

Assuming the 90 days trading horizon Digistar Bhd is expected to generate 3.82 times more return on investment than Alliance Financial. However, Digistar Bhd is 3.82 times more volatile than Alliance Financial Group. It trades about 0.05 of its potential returns per unit of risk. Alliance Financial Group is currently generating about 0.14 per unit of risk. If you would invest  5.00  in Digistar Bhd on September 14, 2024 and sell it today you would earn a total of  0.50  from holding Digistar Bhd or generate 10.0% return on investment over 90 days.

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

Digistar Bhd  vs.  Alliance Financial Group

Digistar Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digistar Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Digistar Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Alliance Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digistar Bhd and Alliance Financial

The main advantage of trading using opposite Digistar Bhd and Alliance Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digistar Bhd position performs unexpectedly, Alliance Financial 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 Alliance Financial will offset losses from the drop in Alliance Financial's long position.

The idea behind Digistar Bhd and Alliance Financial Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.