Correlation Between Astar and DRA Global

Can any of the company-specific risk be diversified away by investing in both Astar and DRA Global 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 Astar and DRA Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Astar and DRA Global, you can compare the effects of market volatilities on Astar and DRA Global 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 Astar with a short position of DRA Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and DRA Global.

Diversification Opportunities for Astar and DRA Global

-0.57

Correlation Coefficient

Astar  DRA Global

Excellent diversification

The 3 months correlation between Astar and DRA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Astar and DRA Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRA Global and Astar 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 Astar are associated (or correlated) with DRA Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRA Global has no effect on the direction of Astar i.e., Astar and DRA Global go up and down completely randomly.

Pair Corralation between Astar and DRA Global

Assuming the 90 days trading horizon Astar is expected to under-perform the DRA Global. In addition to that, Astar is 1.55 times more volatile than DRA Global. It trades about -0.16 of its total potential returns per unit of risk. DRA Global is currently generating about 0.16 per unit of volatility. If you would invest  220,100  in DRA Global on October 11, 2024 and sell it today you would earn a total of  17,300  from holding DRA Global or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.19%
Values	Daily Returns

Astar  vs.  DRA Global

Astar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DRA Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRA Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, DRA Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Astar and DRA Global

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

The idea behind Astar and DRA Global 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.