Correlation Between Aster DM and Lotus Eye

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

Diversification Opportunities for Aster DM and Lotus Eye

0.65

Correlation Coefficient

Aster DM  Lotus Eye

Poor diversification

The 3 months correlation between Aster and Lotus is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Lotus Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Eye Hospital 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 Lotus Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Eye Hospital has no effect on the direction of Aster DM i.e., Aster DM and Lotus Eye go up and down completely randomly.

Pair Corralation between Aster DM and Lotus Eye

Assuming the 90 days trading horizon Aster DM Healthcare is expected to under-perform the Lotus Eye. But the stock apears to be less risky and, when comparing its historical volatility, Aster DM Healthcare is 1.35 times less risky than Lotus Eye. The stock trades about -0.17 of its potential returns per unit of risk. The Lotus Eye Hospital is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  7,383  in Lotus Eye Hospital on November 29, 2024 and sell it today you would lose (1,116) from holding Lotus Eye Hospital or give up 15.12% of portfolio value over 90 days.

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

Aster DM Healthcare  vs.  Lotus Eye Hospital

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lotus Eye Hospital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotus Eye Hospital 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aster DM and Lotus Eye

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

The idea behind Aster DM Healthcare and Lotus Eye Hospital 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.