Correlation Between Compucom Software and Digjam

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

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

Diversification Opportunities for Compucom Software and Digjam

0.28

Correlation Coefficient

Compucom Software  Digjam

Modest diversification

The 3 months correlation between Compucom and Digjam is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Compucom Software Limited and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Compucom Software 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 Compucom Software Limited 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 Compucom Software i.e., Compucom Software and Digjam go up and down completely randomly.

Pair Corralation between Compucom Software and Digjam

Assuming the 90 days trading horizon Compucom Software Limited is expected to under-perform the Digjam. In addition to that, Compucom Software is 1.1 times more volatile than Digjam Limited. It trades about -0.08 of its total potential returns per unit of risk. Digjam Limited is currently generating about -0.03 per unit of volatility. If you would invest  8,577  in Digjam Limited on September 20, 2024 and sell it today you would lose (553.00) from holding Digjam Limited or give up 6.45% of portfolio value over 90 days.

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

Compucom Software Limited  vs.  Digjam Limited

Compucom Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compucom Software Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 quite persistent primary indicators, Digjam is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Compucom Software and Digjam

The main advantage of trading using opposite Compucom Software and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compucom Software 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 Compucom Software Limited 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.