Correlation Between Aster DM and Golden Tobacco

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

Diversification Opportunities for Aster DM and Golden Tobacco

0.05

Correlation Coefficient

Aster DM  Golden Tobacco

Significant diversification

The 3 months correlation between Aster and Golden is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco 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 Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of Aster DM i.e., Aster DM and Golden Tobacco go up and down completely randomly.

Pair Corralation between Aster DM and Golden Tobacco

Assuming the 90 days trading horizon Aster DM Healthcare is expected to under-perform the Golden Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Aster DM Healthcare is 1.74 times less risky than Golden Tobacco. The stock trades about -0.12 of its potential returns per unit of risk. The Golden Tobacco Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,001  in Golden Tobacco Limited on December 27, 2024 and sell it today you would lose (446.00) from holding Golden Tobacco Limited or give up 11.15% of portfolio value over 90 days.

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

Aster DM Healthcare  vs.  Golden Tobacco Limited

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.

Golden Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aster DM and Golden Tobacco

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

The idea behind Aster DM Healthcare and Golden Tobacco 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.