Correlation Between SafePal and Astar

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

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

Diversification Opportunities for SafePal and Astar

0.16

Correlation Coefficient

SafePal  Astar

Average diversification

The 3 months correlation between SafePal and Astar is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding SafePal and Astar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astar and SafePal 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 SafePal are associated (or correlated) with Astar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astar has no effect on the direction of SafePal i.e., SafePal and Astar go up and down completely randomly.

Pair Corralation between SafePal and Astar

Assuming the 90 days trading horizon SafePal is expected to generate 11.12 times less return on investment than Astar. But when comparing it to its historical volatility, SafePal is 1.18 times less risky than Astar. It trades about 0.02 of its potential returns per unit of risk. Astar is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5.75  in Astar on September 1, 2024 and sell it today you would earn a total of  2.61  from holding Astar or generate 45.39% return on investment over 90 days.

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

SafePal  vs.  Astar

SafePal

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SafePal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SafePal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Astar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SafePal and Astar

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

The idea behind SafePal and Astar 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.