Correlation Between General Insurance and Aster DM

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

By analyzing existing cross correlation between General Insurance and Aster DM Healthcare, you can compare the effects of market volatilities on General Insurance and Aster DM 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 General Insurance with a short position of Aster DM. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Insurance and Aster DM.

Diversification Opportunities for General Insurance and Aster DM

0.87

Correlation Coefficient

General Insurance  Aster DM

Very poor diversification

The 3 months correlation between General and Aster is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Insurance and Aster DM Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aster DM Healthcare and General Insurance 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 General Insurance are associated (or correlated) with Aster DM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aster DM Healthcare has no effect on the direction of General Insurance i.e., General Insurance and Aster DM go up and down completely randomly.

Pair Corralation between General Insurance and Aster DM

Assuming the 90 days trading horizon General Insurance is expected to under-perform the Aster DM. In addition to that, General Insurance is 2.94 times more volatile than Aster DM Healthcare. It trades about -0.12 of its total potential returns per unit of risk. Aster DM Healthcare is currently generating about -0.01 per unit of volatility. If you would invest  50,220  in Aster DM Healthcare on October 25, 2024 and sell it today you would lose (260.00) from holding Aster DM Healthcare or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

General Insurance  vs.  Aster DM Healthcare

General Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Aster DM Healthcare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aster DM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with General Insurance and Aster DM

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

The idea behind General Insurance and Aster DM Healthcare 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.