Correlation Between Astral Foods and SBM OFFSHORE

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

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

Diversification Opportunities for Astral Foods and SBM OFFSHORE

-0.32

Correlation Coefficient

Astral Foods  SBM OFFSHORE

Very good diversification

The 3 months correlation between Astral and SBM is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Astral Foods Limited and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE and Astral Foods 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 Astral Foods Limited are associated (or correlated) with SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Astral Foods i.e., Astral Foods and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Astral Foods and SBM OFFSHORE

Assuming the 90 days trading horizon Astral Foods Limited is expected to under-perform the SBM OFFSHORE. In addition to that, Astral Foods is 1.61 times more volatile than SBM OFFSHORE. It trades about -0.1 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about -0.1 per unit of volatility. If you would invest  1,700  in SBM OFFSHORE on September 30, 2024 and sell it today you would lose (35.00) from holding SBM OFFSHORE or give up 2.06% of portfolio value over 90 days.

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

Astral Foods Limited  vs.  SBM OFFSHORE

Astral Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astral Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Astral Foods is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SBM OFFSHORE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Astral Foods and SBM OFFSHORE

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

The idea behind Astral Foods Limited and SBM OFFSHORE 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.