Correlation Between Astar and Southern California

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

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

Diversification Opportunities for Astar and Southern California

0.53

Correlation Coefficient

Astar  Southern California

Very weak diversification

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

Pair Corralation between Astar and Southern California

Assuming the 90 days trading horizon Astar is expected to generate 4.13 times more return on investment than Southern California. However, Astar is 4.13 times more volatile than Southern California Gas. It trades about 0.02 of its potential returns per unit of risk. Southern California Gas is currently generating about -0.11 per unit of risk. If you would invest  5.48  in Astar on October 25, 2024 and sell it today you would lose (0.14) from holding Astar or give up 2.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.38%
Values	Daily Returns

Astar  vs.  Southern California Gas

Astar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 1 (%) 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.

Southern California Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern California Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Astar and Southern California

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

The idea behind Astar and Southern California Gas 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.