Correlation Between Aster DM and Wonder Electricals

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

Diversification Opportunities for Aster DM and Wonder Electricals

-0.55

Correlation Coefficient

Aster DM  Wonder Electricals

Excellent diversification

The 3 months correlation between Aster and Wonder is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Wonder Electricals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonder Electricals 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 Wonder Electricals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonder Electricals has no effect on the direction of Aster DM i.e., Aster DM and Wonder Electricals go up and down completely randomly.

Pair Corralation between Aster DM and Wonder Electricals

Assuming the 90 days trading horizon Aster DM Healthcare is expected to under-perform the Wonder Electricals. But the stock apears to be less risky and, when comparing its historical volatility, Aster DM Healthcare is 1.98 times less risky than Wonder Electricals. The stock trades about -0.12 of its potential returns per unit of risk. The Wonder Electricals Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  15,729  in Wonder Electricals Limited on December 23, 2024 and sell it today you would earn a total of  1,522  from holding Wonder Electricals Limited or generate 9.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aster DM Healthcare  vs.  Wonder Electricals Limited

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Wonder Electricals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wonder Electricals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Wonder Electricals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aster DM and Wonder Electricals

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

The idea behind Aster DM Healthcare and Wonder Electricals Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.