Correlation Between Ashtrom and Afcon Holdings

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

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

Diversification Opportunities for Ashtrom and Afcon Holdings

0.9

Correlation Coefficient

Ashtrom  Afcon Holdings

Almost no diversification

The 3 months correlation between Ashtrom and Afcon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ashtrom Group and Afcon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afcon Holdings and Ashtrom 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 Ashtrom Group are associated (or correlated) with Afcon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afcon Holdings has no effect on the direction of Ashtrom i.e., Ashtrom and Afcon Holdings go up and down completely randomly.

Pair Corralation between Ashtrom and Afcon Holdings

Assuming the 90 days trading horizon Ashtrom is expected to generate 2.08 times less return on investment than Afcon Holdings. But when comparing it to its historical volatility, Ashtrom Group is 1.63 times less risky than Afcon Holdings. It trades about 0.33 of its potential returns per unit of risk. Afcon Holdings is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  922,600  in Afcon Holdings on September 24, 2024 and sell it today you would earn a total of  774,400  from holding Afcon Holdings or generate 83.94% return on investment over 90 days.

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

Ashtrom Group  vs.  Afcon Holdings

Ashtrom Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtrom Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ashtrom sustained solid returns over the last few months and may actually be approaching a breakup point.

Afcon Holdings

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Afcon Holdings are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Afcon Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ashtrom and Afcon Holdings

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

The idea behind Ashtrom Group and Afcon Holdings 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.