Correlation Between Kalyani Steels and Digjam

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

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

Diversification Opportunities for Kalyani Steels and Digjam

-0.3

Correlation Coefficient

Kalyani Steels  Digjam

Very good diversification

The 3 months correlation between Kalyani and Digjam is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and Digjam Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digjam Limited and Kalyani Steels 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 Kalyani Steels 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 Kalyani Steels i.e., Kalyani Steels and Digjam go up and down completely randomly.

Pair Corralation between Kalyani Steels and Digjam

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to generate 1.19 times more return on investment than Digjam. However, Kalyani Steels is 1.19 times more volatile than Digjam Limited. It trades about 0.18 of its potential returns per unit of risk. Digjam Limited is currently generating about -0.13 per unit of risk. If you would invest  86,015  in Kalyani Steels Limited on September 27, 2024 and sell it today you would earn a total of  33,860  from holding Kalyani Steels Limited or generate 39.37% return on investment over 90 days.

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

Kalyani Steels Limited  vs.  Digjam Limited

Kalyani Steels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kalyani Steels 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Kalyani Steels and Digjam

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

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.