Correlation Between JSW Steel and Aster DM

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

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

Diversification Opportunities for JSW Steel and Aster DM

-0.48

Correlation Coefficient

JSW Steel  Aster DM

Very good diversification

The 3 months correlation between JSW and Aster is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding JSW Steel Limited 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 JSW Steel 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 JSW Steel Limited 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 JSW Steel i.e., JSW Steel and Aster DM go up and down completely randomly.

Pair Corralation between JSW Steel and Aster DM

Assuming the 90 days trading horizon JSW Steel Limited is expected to under-perform the Aster DM. But the stock apears to be less risky and, when comparing its historical volatility, JSW Steel Limited is 1.51 times less risky than Aster DM. The stock trades about -0.11 of its potential returns per unit of risk. The Aster DM Healthcare is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  40,585  in Aster DM Healthcare on October 7, 2024 and sell it today you would earn a total of  11,550  from holding Aster DM Healthcare or generate 28.46% return on investment over 90 days.

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

JSW Steel Limited  vs.  Aster DM Healthcare

JSW Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JSW Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Aster DM Healthcare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JSW Steel and Aster DM

The main advantage of trading using opposite JSW Steel and Aster DM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JSW Steel 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 JSW Steel Limited 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.