Correlation Between Aster DM and Steel Authority

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

Diversification Opportunities for Aster DM and Steel Authority

0.31

Correlation Coefficient

Aster DM  Steel Authority

Weak diversification

The 3 months correlation between Aster and Steel is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Steel Authority of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Authority 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 Steel Authority. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Authority has no effect on the direction of Aster DM i.e., Aster DM and Steel Authority go up and down completely randomly.

Pair Corralation between Aster DM and Steel Authority

Assuming the 90 days trading horizon Aster DM Healthcare is expected to under-perform the Steel Authority. But the stock apears to be less risky and, when comparing its historical volatility, Aster DM Healthcare is 1.42 times less risky than Steel Authority. The stock trades about -0.11 of its potential returns per unit of risk. The Steel Authority of is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  11,906  in Steel Authority of on December 24, 2024 and sell it today you would lose (182.00) from holding Steel Authority of or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Aster DM Healthcare  vs.  Steel Authority of

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Steel Authority

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Authority of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Steel Authority is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aster DM and Steel Authority

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

The idea behind Aster DM Healthcare and Steel Authority of 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.