Correlation Between Aster DM and Max Healthcare

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

Diversification Opportunities for Aster DM and Max Healthcare

0.74

Correlation Coefficient

Aster DM  Max Healthcare

Poor diversification

The 3 months correlation between Aster and Max is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Max Healthcare Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Healthcare Institute 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 Max Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Healthcare Institute has no effect on the direction of Aster DM i.e., Aster DM and Max Healthcare go up and down completely randomly.

Pair Corralation between Aster DM and Max Healthcare

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 0.44 times more return on investment than Max Healthcare. However, Aster DM Healthcare is 2.29 times less risky than Max Healthcare. It trades about -0.07 of its potential returns per unit of risk. Max Healthcare Institute is currently generating about -0.14 per unit of risk. If you would invest  50,550  in Aster DM Healthcare on October 27, 2024 and sell it today you would lose (940.00) from holding Aster DM Healthcare or give up 1.86% 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.  Max Healthcare Institute

Aster DM Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Max Healthcare Institute

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Max Healthcare Institute are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Max Healthcare may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aster DM and Max Healthcare

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

The idea behind Aster DM Healthcare and Max Healthcare Institute 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.