Correlation Between Aster DM and Medplus Health

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

Diversification Opportunities for Aster DM and Medplus Health

0.89

Correlation Coefficient

Aster DM  Medplus Health

Very poor diversification

The 3 months correlation between Aster and Medplus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Medplus Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medplus Health Services 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 Medplus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medplus Health Services has no effect on the direction of Aster DM i.e., Aster DM and Medplus Health go up and down completely randomly.

Pair Corralation between Aster DM and Medplus Health

Assuming the 90 days trading horizon Aster DM is expected to generate 1.12 times less return on investment than Medplus Health. In addition to that, Aster DM is 1.28 times more volatile than Medplus Health Services. It trades about 0.14 of its total potential returns per unit of risk. Medplus Health Services is currently generating about 0.2 per unit of volatility. If you would invest  68,945  in Medplus Health Services on September 25, 2024 and sell it today you would earn a total of  16,135  from holding Medplus Health Services or generate 23.4% 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.  Medplus Health Services

Aster DM Healthcare

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Medplus Health Services

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medplus Health Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Medplus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aster DM and Medplus Health

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

The idea behind Aster DM Healthcare and Medplus Health Services 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.