Correlation Between Astar and Level

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

By analyzing existing cross correlation between Astar and Level 3 Financing, you can compare the effects of market volatilities on Astar and Level 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 Level. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Level.

Diversification Opportunities for Astar and Level

-0.08

Correlation Coefficient

Astar  Level

Good diversification

The 3 months correlation between Astar and Level is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Level 3 Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level 3 Financing 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 Level. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level 3 Financing has no effect on the direction of Astar i.e., Astar and Level go up and down completely randomly.

Pair Corralation between Astar and Level

Assuming the 90 days trading horizon Astar is expected to generate 4.44 times less return on investment than Level. But when comparing it to its historical volatility, Astar is 2.52 times less risky than Level. It trades about 0.02 of its potential returns per unit of risk. Level 3 Financing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,900  in Level 3 Financing on October 25, 2024 and sell it today you would lose (404.00) from holding Level 3 Financing or give up 4.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.63%
Values	Daily Returns

Astar  vs.  Level 3 Financing

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.

Level 3 Financing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Level 3 Financing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Level sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astar and Level

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

The idea behind Astar and Level 3 Financing 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.