Correlation Between Aster DM and Patanjali Foods

Can any of the company-specific risk be diversified away by investing in both Aster DM and Patanjali Foods 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 Patanjali Foods 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 Patanjali Foods Limited, you can compare the effects of market volatilities on Aster DM and Patanjali Foods 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 Patanjali Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aster DM and Patanjali Foods.

Diversification Opportunities for Aster DM and Patanjali Foods

0.35

Correlation Coefficient

Aster DM  Patanjali Foods

Weak diversification

The 3 months correlation between Aster and Patanjali is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Aster DM Healthcare and Patanjali Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patanjali Foods 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 Patanjali Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patanjali Foods has no effect on the direction of Aster DM i.e., Aster DM and Patanjali Foods go up and down completely randomly.

Pair Corralation between Aster DM and Patanjali Foods

Assuming the 90 days trading horizon Aster DM Healthcare is expected to generate 1.11 times more return on investment than Patanjali Foods. However, Aster DM is 1.11 times more volatile than Patanjali Foods Limited. It trades about 0.13 of its potential returns per unit of risk. Patanjali Foods Limited is currently generating about 0.0 per unit of risk. If you would invest  41,570  in Aster DM Healthcare on September 13, 2024 and sell it today you would earn a total of  7,335  from holding Aster DM Healthcare or generate 17.64% return on investment over 90 days.

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

Aster DM Healthcare  vs.  Patanjali Foods Limited

Aster DM Healthcare

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aster DM Healthcare are ranked lower than 10 (%) 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.

Patanjali Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patanjali Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aster DM and Patanjali Foods

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

The idea behind Aster DM Healthcare and Patanjali Foods 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.