Correlation Between Astar and Masco

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

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

Diversification Opportunities for Astar and Masco

-0.53

Correlation Coefficient

Astar  Masco

Excellent diversification

The 3 months correlation between Astar and Masco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco 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 Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Astar i.e., Astar and Masco go up and down completely randomly.

Pair Corralation between Astar and Masco

Assuming the 90 days trading horizon Astar is expected to under-perform the Masco. In addition to that, Astar is 1.12 times more volatile than Masco. It trades about -0.15 of its total potential returns per unit of risk. Masco is currently generating about 0.13 per unit of volatility. If you would invest  114,362  in Masco on December 20, 2024 and sell it today you would earn a total of  41,548  from holding Masco or generate 36.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Astar  vs.  Masco

Astar

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Astar shareholders.

Masco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Masco showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astar and Masco

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

The idea behind Astar and Masco 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.