Correlation Between Ascendas India and RMR

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

By analyzing existing cross correlation between Ascendas India Trust and RMR Group, you can compare the effects of market volatilities on Ascendas India and RMR 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 Ascendas India with a short position of RMR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ascendas India and RMR.

Diversification Opportunities for Ascendas India and RMR

0.81

Correlation Coefficient

Ascendas India  RMR

Very poor diversification

The 3 months correlation between Ascendas and RMR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ascendas India Trust and RMR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMR Group and Ascendas India 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 Ascendas India Trust are associated (or correlated) with RMR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMR Group has no effect on the direction of Ascendas India i.e., Ascendas India and RMR go up and down completely randomly.

Pair Corralation between Ascendas India and RMR

Assuming the 90 days horizon Ascendas India Trust is expected to generate 2.57 times more return on investment than RMR. However, Ascendas India is 2.57 times more volatile than RMR Group. It trades about 0.11 of its potential returns per unit of risk. RMR Group is currently generating about -0.12 per unit of risk. If you would invest  75.00  in Ascendas India Trust on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Ascendas India Trust or generate 5.33% return on investment over 90 days.

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

Ascendas India Trust  vs.  RMR Group

Ascendas India Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascendas India Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

RMR Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Ascendas India and RMR

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

The idea behind Ascendas India Trust and RMR Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.