Correlation Between Astar and James Small

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

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

Diversification Opportunities for Astar and James Small

0.56

Correlation Coefficient

Astar  James Small

Very weak diversification

The 3 months correlation between Astar and James is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Astar and James Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Small Cap 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 James Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Small Cap has no effect on the direction of Astar i.e., Astar and James Small go up and down completely randomly.

Pair Corralation between Astar and James Small

Assuming the 90 days trading horizon Astar is expected to generate 7.74 times more return on investment than James Small. However, Astar is 7.74 times more volatile than James Small Cap. It trades about 0.03 of its potential returns per unit of risk. James Small Cap is currently generating about 0.06 per unit of risk. If you would invest  5.95  in Astar on October 24, 2024 and sell it today you would lose (0.43) from holding Astar or give up 7.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	60.12%
Values	Daily Returns

Astar  vs.  James Small Cap

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.

James Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days James Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, James Small 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 James Small

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

The idea behind Astar and James Small Cap 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.