Correlation Between Aster DM and Styrenix Performance

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

Diversification Opportunities for Aster DM and Styrenix Performance

0.67

Correlation Coefficient

Aster DM  Styrenix Performance

Poor diversification

The 3 months correlation between Aster and Styrenix is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Styrenix Performance Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Styrenix Performance 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 Styrenix Performance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Styrenix Performance has no effect on the direction of Aster DM i.e., Aster DM and Styrenix Performance go up and down completely randomly.

Pair Corralation between Aster DM and Styrenix Performance

Assuming the 90 days trading horizon Aster DM is expected to generate 1.7 times less return on investment than Styrenix Performance. In addition to that, Aster DM is 1.11 times more volatile than Styrenix Performance Materials. It trades about 0.29 of its total potential returns per unit of risk. Styrenix Performance Materials is currently generating about 0.55 per unit of volatility. If you would invest  241,023  in Styrenix Performance Materials on September 20, 2024 and sell it today you would earn a total of  62,832  from holding Styrenix Performance Materials or generate 26.07% return on investment over 90 days.

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

Aster DM Healthcare  vs.  Styrenix Performance Materials

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 unsteady basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Styrenix Performance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Styrenix Performance Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Styrenix Performance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aster DM and Styrenix Performance

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

The idea behind Aster DM Healthcare and Styrenix Performance Materials 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..