Correlation Between Astar and Free Market

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

By analyzing existing cross correlation between Astar and Free Market Fixed, you can compare the effects of market volatilities on Astar and Free Market 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 Free Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Free Market.

Diversification Opportunities for Astar and Free Market

0.2

Correlation Coefficient

Astar  Free Market

Modest diversification

The 3 months correlation between Astar and Free is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Free Market Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Free Market Fixed 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 Free Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Free Market Fixed has no effect on the direction of Astar i.e., Astar and Free Market go up and down completely randomly.

Pair Corralation between Astar and Free Market

Assuming the 90 days trading horizon Astar is expected to generate 12.84 times more return on investment than Free Market. However, Astar is 12.84 times more volatile than Free Market Fixed. It trades about 0.04 of its potential returns per unit of risk. Free Market Fixed is currently generating about -0.11 per unit of risk. If you would invest  5.91  in Astar on October 10, 2024 and sell it today you would earn a total of  0.23  from holding Astar or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Astar  vs.  Free Market Fixed

Astar

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Free Market Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Free Market Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Free Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Astar and Free Market

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

The idea behind Astar and Free Market Fixed 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.