Correlation Between Aster DM and KEI Industries

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

Diversification Opportunities for Aster DM and KEI Industries

0.87

Correlation Coefficient

Aster DM  KEI Industries

Very poor diversification

The 3 months correlation between Aster and KEI is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries 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 KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of Aster DM i.e., Aster DM and KEI Industries go up and down completely randomly.

Pair Corralation between Aster DM and KEI Industries

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 0.43 times more return on investment than KEI Industries. However, Aster DM Healthcare is 2.33 times less risky than KEI Industries. It trades about -0.12 of its potential returns per unit of risk. KEI Industries Limited is currently generating about -0.12 per unit of risk. If you would invest  49,959  in Aster DM Healthcare on December 22, 2024 and sell it today you would lose (6,659) from holding Aster DM Healthcare or give up 13.33% 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.  KEI Industries 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.

KEI Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aster DM and KEI Industries

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

The idea behind Aster DM Healthcare and KEI Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.