Correlation Between Alkali Metals and Aster DM

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

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

Diversification Opportunities for Alkali Metals and Aster DM

-0.27

Correlation Coefficient

Alkali Metals  Aster DM

Very good diversification

The 3 months correlation between Alkali and Aster is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Aster DM Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aster DM Healthcare and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with Aster DM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aster DM Healthcare has no effect on the direction of Alkali Metals i.e., Alkali Metals and Aster DM go up and down completely randomly.

Pair Corralation between Alkali Metals and Aster DM

Assuming the 90 days trading horizon Alkali Metals is expected to generate 6.24 times less return on investment than Aster DM. In addition to that, Alkali Metals is 1.24 times more volatile than Aster DM Healthcare. It trades about 0.01 of its total potential returns per unit of risk. Aster DM Healthcare is currently generating about 0.1 per unit of volatility. If you would invest  25,768  in Aster DM Healthcare on October 4, 2024 and sell it today you would earn a total of  26,442  from holding Aster DM Healthcare or generate 102.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.38%
Values	Daily Returns

Alkali Metals Limited  vs.  Aster DM Healthcare

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aster DM Healthcare

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkali Metals and Aster DM

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

The idea behind Alkali Metals Limited and Aster DM Healthcare 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.