Correlation Between American Security and Astra Energy

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

By analyzing existing cross correlation between American Security Resources and Astra Energy, you can compare the effects of market volatilities on American Security and Astra Energy 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 American Security with a short position of Astra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Security and Astra Energy.

Diversification Opportunities for American Security and Astra Energy

-0.06

Correlation Coefficient

American Security  Astra Energy

Good diversification

The 3 months correlation between American and Astra is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Security Resources and Astra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Energy and American Security 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 American Security Resources are associated (or correlated) with Astra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Energy has no effect on the direction of American Security i.e., American Security and Astra Energy go up and down completely randomly.

Pair Corralation between American Security and Astra Energy

Given the investment horizon of 90 days American Security Resources is expected to generate 2.98 times more return on investment than Astra Energy. However, American Security is 2.98 times more volatile than Astra Energy. It trades about 0.14 of its potential returns per unit of risk. Astra Energy is currently generating about 0.05 per unit of risk. If you would invest  0.01  in American Security Resources on December 29, 2024 and sell it today you would earn a total of  0.01  from holding American Security Resources or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

American Security Resources  vs.  Astra Energy

American Security

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Security Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Security exhibited solid returns over the last few months and may actually be approaching a breakup point.

Astra Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Astra Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Security and Astra Energy

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

The idea behind American Security Resources and Astra Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.