Correlation Between Astar and Multimanager Lifestyle

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

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

Diversification Opportunities for Astar and Multimanager Lifestyle

0.54

Correlation Coefficient

Astar  Multimanager Lifestyle

Very weak diversification

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

Pair Corralation between Astar and Multimanager Lifestyle

Assuming the 90 days trading horizon Astar is expected to generate 8.72 times more return on investment than Multimanager Lifestyle. However, Astar is 8.72 times more volatile than Multimanager Lifestyle Growth. It trades about 0.01 of its potential returns per unit of risk. Multimanager Lifestyle Growth is currently generating about 0.05 per unit of risk. If you would invest  5.65  in Astar on October 26, 2024 and sell it today you would lose (0.36) from holding Astar or give up 6.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Astar  vs.  Multimanager Lifestyle Growth

Astar

Risk-Adjusted Performance

0 of 100

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.

Multimanager Lifestyle

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Growth are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Multimanager Lifestyle 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 Multimanager Lifestyle

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

The idea behind Astar and Multimanager Lifestyle Growth 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.