Correlation Between Aster DM and MIRC Electronics

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

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

Diversification Opportunities for Aster DM and MIRC Electronics

-0.34

Correlation Coefficient

Aster DM  MIRC Electronics

Very good diversification

The 3 months correlation between Aster and MIRC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and MIRC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIRC Electronics and Aster DM 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 Aster DM Healthcare are associated (or correlated) with MIRC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIRC Electronics has no effect on the direction of Aster DM i.e., Aster DM and MIRC Electronics go up and down completely randomly.

Pair Corralation between Aster DM and MIRC Electronics

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 0.77 times more return on investment than MIRC Electronics. However, Aster DM Healthcare is 1.29 times less risky than MIRC Electronics. It trades about 0.12 of its potential returns per unit of risk. MIRC Electronics Limited is currently generating about -0.07 per unit of risk. If you would invest  41,390  in Aster DM Healthcare on September 17, 2024 and sell it today you would earn a total of  6,640  from holding Aster DM Healthcare or generate 16.04% return on investment over 90 days.

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

Aster DM Healthcare  vs.  MIRC Electronics Limited

Aster DM Healthcare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Aster DM displayed solid returns over the last few months and may actually be approaching a breakup point.

MIRC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aster DM and MIRC Electronics

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

The idea behind Aster DM Healthcare and MIRC Electronics Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.