Correlation Between Cambridge Technology and Digjam

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

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

Diversification Opportunities for Cambridge Technology and Digjam

0.27

Correlation Coefficient

Cambridge Technology  Digjam

Modest diversification

The 3 months correlation between Cambridge and Digjam is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Cambridge Technology 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 Cambridge Technology Enterprises 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 Cambridge Technology i.e., Cambridge Technology and Digjam go up and down completely randomly.

Pair Corralation between Cambridge Technology and Digjam

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 1.03 times more return on investment than Digjam. However, Cambridge Technology is 1.03 times more volatile than Digjam Limited. It trades about 0.32 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.17 per unit of risk. If you would invest  8,576  in Cambridge Technology Enterprises on September 24, 2024 and sell it today you would earn a total of  1,934  from holding Cambridge Technology Enterprises or generate 22.55% return on investment over 90 days.

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

Cambridge Technology Enterpris  vs.  Digjam Limited

Cambridge Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cambridge Technology Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Cambridge Technology and Digjam

The main advantage of trading using opposite Cambridge Technology and Digjam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambridge Technology 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 Cambridge Technology Enterprises 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.