Correlation Between Healthcare Global and Aster DM

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

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

Diversification Opportunities for Healthcare Global and Aster DM

-0.18

Correlation Coefficient

Healthcare Global  Aster DM

Good diversification

The 3 months correlation between Healthcare and Aster is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Global Enterprises 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 Healthcare Global 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 Healthcare Global Enterprises 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 Healthcare Global i.e., Healthcare Global and Aster DM go up and down completely randomly.

Pair Corralation between Healthcare Global and Aster DM

Assuming the 90 days trading horizon Healthcare Global Enterprises is expected to generate 1.13 times more return on investment than Aster DM. However, Healthcare Global is 1.13 times more volatile than Aster DM Healthcare. It trades about 0.1 of its potential returns per unit of risk. Aster DM Healthcare is currently generating about -0.1 per unit of risk. If you would invest  47,235  in Healthcare Global Enterprises on December 25, 2024 and sell it today you would earn a total of  5,620  from holding Healthcare Global Enterprises or generate 11.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Healthcare Global Enterprises  vs.  Aster DM Healthcare

Healthcare Global

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Global Enterprises are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Healthcare Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aster DM Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aster DM Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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 Healthcare Global and Aster DM

The main advantage of trading using opposite Healthcare Global and Aster DM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Global 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 Healthcare Global Enterprises 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.