Correlation Between Zenith Steel and Aster DM

Can any of the company-specific risk be diversified away by investing in both Zenith 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 Zenith 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 Zenith Steel Pipes and Aster DM Healthcare, you can compare the effects of market volatilities on Zenith 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 Zenith Steel with a short position of Aster DM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zenith Steel and Aster DM.

Diversification Opportunities for Zenith Steel and Aster DM

-0.68

Correlation Coefficient

Zenith Steel  Aster DM

Excellent diversification

The 3 months correlation between Zenith and Aster is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Zenith Steel Pipes 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 Zenith 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 Zenith Steel Pipes 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 Zenith Steel i.e., Zenith Steel and Aster DM go up and down completely randomly.

Pair Corralation between Zenith Steel and Aster DM

Assuming the 90 days trading horizon Zenith Steel Pipes is expected to under-perform the Aster DM. In addition to that, Zenith Steel is 1.13 times more volatile than Aster DM Healthcare. It trades about -0.02 of its total potential returns per unit of risk. Aster DM Healthcare is currently generating about 0.24 per unit of volatility. If you would invest  43,925  in Aster DM Healthcare on October 6, 2024 and sell it today you would earn a total of  8,210  from holding Aster DM Healthcare or generate 18.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Zenith Steel Pipes  vs.  Aster DM Healthcare

Zenith Steel Pipes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zenith Steel Pipes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 Zenith Steel and Aster DM

The main advantage of trading using opposite Zenith Steel and Aster DM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zenith 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 Zenith Steel Pipes 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..