Correlation Between Aster DM and Beta Drugs

Can any of the company-specific risk be diversified away by investing in both Aster DM and Beta Drugs 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 Beta Drugs 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 Beta Drugs, you can compare the effects of market volatilities on Aster DM and Beta Drugs 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 Beta Drugs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aster DM and Beta Drugs.

Diversification Opportunities for Aster DM and Beta Drugs

0.81

Correlation Coefficient

Aster DM  Beta Drugs

Very poor diversification

The 3 months correlation between Aster and Beta is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Beta Drugs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Drugs 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 Beta Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Drugs has no effect on the direction of Aster DM i.e., Aster DM and Beta Drugs go up and down completely randomly.

Pair Corralation between Aster DM and Beta Drugs

Assuming the 90 days trading horizon Aster DM Healthcare is expected to under-perform the Beta Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Aster DM Healthcare is 2.23 times less risky than Beta Drugs. The stock trades about -0.12 of its potential returns per unit of risk. The Beta Drugs is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  201,670  in Beta Drugs on December 22, 2024 and sell it today you would lose (9,165) from holding Beta Drugs or give up 4.54% of portfolio value over 90 days.

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

Aster DM Healthcare  vs.  Beta Drugs

Aster DM Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aster DM Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Beta Drugs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beta Drugs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Beta Drugs is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aster DM and Beta Drugs

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

The idea behind Aster DM Healthcare and Beta Drugs 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.