Correlation Between Astar and Deep Value

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Can any of the company-specific risk be diversified away by investing in both Astar and Deep Value 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 Deep Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astar and Deep Value Driller, you can compare the effects of market volatilities on Astar and Deep Value 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 Deep Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Deep Value.

Diversification Opportunities for Astar and Deep Value

-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Astar and Deep is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller 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 Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Astar i.e., Astar and Deep Value go up and down completely randomly.

Pair Corralation between Astar and Deep Value

Assuming the 90 days trading horizon Astar is expected to under-perform the Deep Value. In addition to that, Astar is 3.06 times more volatile than Deep Value Driller. It trades about -0.11 of its total potential returns per unit of risk. Deep Value Driller is currently generating about 0.24 per unit of volatility. If you would invest  1,601  in Deep Value Driller on October 26, 2024 and sell it today you would earn a total of  107.00  from holding Deep Value Driller or generate 6.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy86.36%
ValuesDaily Returns

Astar  vs.  Deep Value Driller

 Performance 
       Timeline  
Astar 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Deep Value Driller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Astar and Deep Value Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Astar and Deep Value

The main advantage of trading using opposite Astar and Deep Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar position performs unexpectedly, Deep Value 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 Deep Value will offset losses from the drop in Deep Value's long position.
The idea behind Astar and Deep Value Driller 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.
Check out your portfolio center.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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