Correlation Between Astra Energy and Orsted AS

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

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

Diversification Opportunities for Astra Energy and Orsted AS

0.78

Correlation Coefficient

Astra Energy  Orsted AS

Poor diversification

The 3 months correlation between Astra and Orsted is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Astra Energy and Orsted AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS ADR and Astra Energy 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 Astra Energy are associated (or correlated) with Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS ADR has no effect on the direction of Astra Energy i.e., Astra Energy and Orsted AS go up and down completely randomly.

Pair Corralation between Astra Energy and Orsted AS

Given the investment horizon of 90 days Astra Energy is expected to generate 3.66 times more return on investment than Orsted AS. However, Astra Energy is 3.66 times more volatile than Orsted AS ADR. It trades about -0.01 of its potential returns per unit of risk. Orsted AS ADR is currently generating about -0.17 per unit of risk. If you would invest  12.00  in Astra Energy on September 16, 2024 and sell it today you would lose (3.28) from holding Astra Energy or give up 27.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Astra Energy  vs.  Orsted AS ADR

Astra Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astra Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Astra Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Orsted AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orsted AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Astra Energy and Orsted AS

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

The idea behind Astra Energy and Orsted AS ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..