Correlation Between Aster DM and Ami Organics

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

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

Diversification Opportunities for Aster DM and Ami Organics

0.76

Correlation Coefficient

Aster DM  Ami Organics

Poor diversification

The 3 months correlation between Aster and Ami is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Ami Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ami Organics Limited and Aster DM 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 Aster DM Healthcare are associated (or correlated) with Ami Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ami Organics Limited has no effect on the direction of Aster DM i.e., Aster DM and Ami Organics go up and down completely randomly.

Pair Corralation between Aster DM and Ami Organics

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 0.43 times more return on investment than Ami Organics. However, Aster DM Healthcare is 2.34 times less risky than Ami Organics. It trades about 0.27 of its potential returns per unit of risk. Ami Organics Limited is currently generating about -0.08 per unit of risk. If you would invest  48,875  in Aster DM Healthcare on October 6, 2024 and sell it today you would earn a total of  3,260  from holding Aster DM Healthcare or generate 6.67% return on investment over 90 days.

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

Aster DM Healthcare  vs.  Ami Organics Limited

Aster DM Healthcare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Ami Organics Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ami Organics Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ami Organics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aster DM and Ami Organics

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

The idea behind Aster DM Healthcare and Ami Organics 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.