Correlation Between Aster DM and Rainbow Childrens

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

Diversification Opportunities for Aster DM and Rainbow Childrens

0.73

Correlation Coefficient

Aster DM  Rainbow Childrens

Poor diversification

The 3 months correlation between Aster and Rainbow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Rainbow Childrens Medicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rainbow Childrens 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 Rainbow Childrens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rainbow Childrens has no effect on the direction of Aster DM i.e., Aster DM and Rainbow Childrens go up and down completely randomly.

Pair Corralation between Aster DM and Rainbow Childrens

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 1.36 times more return on investment than Rainbow Childrens. However, Aster DM is 1.36 times more volatile than Rainbow Childrens Medicare. It trades about 0.09 of its potential returns per unit of risk. Rainbow Childrens Medicare is currently generating about 0.07 per unit of risk. If you would invest  21,343  in Aster DM Healthcare on August 31, 2024 and sell it today you would earn a total of  27,527  from holding Aster DM Healthcare or generate 128.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.73%
Values	Daily Returns

Aster DM Healthcare  vs.  Rainbow Childrens Medicare

Aster DM Healthcare

Risk-Adjusted Performance

12 of 100

Good

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.

Rainbow Childrens

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, Rainbow Childrens showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aster DM and Rainbow Childrens

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

The idea behind Aster DM Healthcare and Rainbow Childrens Medicare 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.