Correlation Between Taj GVK and Aster DM

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

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

Diversification Opportunities for Taj GVK and Aster DM

0.85

Correlation Coefficient

Taj GVK  Aster DM

Very poor diversification

The 3 months correlation between Taj and Aster is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Taj GVK Hotels 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 Taj GVK 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 Taj GVK Hotels 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 Taj GVK i.e., Taj GVK and Aster DM go up and down completely randomly.

Pair Corralation between Taj GVK and Aster DM

Assuming the 90 days trading horizon Taj GVK is expected to generate 5.64 times less return on investment than Aster DM. In addition to that, Taj GVK is 1.15 times more volatile than Aster DM Healthcare. It trades about 0.03 of its total potential returns per unit of risk. Aster DM Healthcare is currently generating about 0.16 per unit of volatility. If you would invest  34,509  in Aster DM Healthcare on September 25, 2024 and sell it today you would earn a total of  15,876  from holding Aster DM Healthcare or generate 46.01% return on investment over 90 days.

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

Taj GVK Hotels  vs.  Aster DM Healthcare

Taj GVK Hotels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taj GVK Hotels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Taj GVK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aster DM Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 11 (%) 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 Taj GVK and Aster DM

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

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.