Correlation Between Aster DM and Mangalore Chemicals

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

Diversification Opportunities for Aster DM and Mangalore Chemicals

0.88

Correlation Coefficient

Aster DM  Mangalore Chemicals

Very poor diversification

The 3 months correlation between Aster and Mangalore is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore Chemicals 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 Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of Aster DM i.e., Aster DM and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between Aster DM and Mangalore Chemicals

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 0.96 times more return on investment than Mangalore Chemicals. However, Aster DM Healthcare is 1.05 times less risky than Mangalore Chemicals. It trades about 0.28 of its potential returns per unit of risk. Mangalore Chemicals Fertilizers is currently generating about 0.16 per unit of risk. If you would invest  43,930  in Aster DM Healthcare on September 26, 2024 and sell it today you would earn a total of  6,290  from holding Aster DM Healthcare or generate 14.32% return on investment over 90 days.

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

Aster DM Healthcare  vs.  Mangalore Chemicals Fertilizer

Aster DM Healthcare

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Mangalore Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mangalore Chemicals Fertilizers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Mangalore Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aster DM and Mangalore Chemicals

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

The idea behind Aster DM Healthcare and Mangalore Chemicals Fertilizers 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.