Correlation Between Astar and MusclePharm

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

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

Diversification Opportunities for Astar and MusclePharm

-0.27

Correlation Coefficient

Astar  MusclePharm

Very good diversification

The 3 months correlation between Astar and MusclePharm is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Astar and MusclePharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MusclePharm 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 MusclePharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MusclePharm has no effect on the direction of Astar i.e., Astar and MusclePharm go up and down completely randomly.

Pair Corralation between Astar and MusclePharm

Assuming the 90 days trading horizon Astar is expected to generate 11.37 times less return on investment than MusclePharm. But when comparing it to its historical volatility, Astar is 7.98 times less risky than MusclePharm. It trades about 0.04 of its potential returns per unit of risk. MusclePharm is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.11  in MusclePharm on October 11, 2024 and sell it today you would lose (0.11) from holding MusclePharm or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.57%
Values	Daily Returns

Astar  vs.  MusclePharm

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.

MusclePharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MusclePharm has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MusclePharm is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Astar and MusclePharm

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

The idea behind Astar and MusclePharm 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.