Correlation Between Astar and Western

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

By analyzing existing cross correlation between Astar and Western Digital 475, you can compare the effects of market volatilities on Astar and Western 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 Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astar and Western.

Diversification Opportunities for Astar and Western

0.31

Correlation Coefficient

Astar  Western

Weak diversification

The 3 months correlation between Astar and Western is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Astar and Western Digital 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 475 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 Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital 475 has no effect on the direction of Astar i.e., Astar and Western go up and down completely randomly.

Pair Corralation between Astar and Western

Assuming the 90 days trading horizon Astar is expected to generate 5.58 times more return on investment than Western. However, Astar is 5.58 times more volatile than Western Digital 475. It trades about 0.01 of its potential returns per unit of risk. Western Digital 475 is currently generating about -0.12 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	Very Weak
Accuracy	95.24%
Values	Daily Returns

Astar  vs.  Western Digital 475

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.

Western Digital 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Western Digital 475 investors.

Pair Trading with Astar and Western

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

The idea behind Astar and Western Digital 475 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.