Correlation Between Astral Foods and Japan Tobacco

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

Diversification Opportunities for Astral Foods and Japan Tobacco

0.43

Correlation Coefficient

Astral Foods  Japan Tobacco

Very weak diversification

The 3 months correlation between Astral and Japan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Astral Foods Limited and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Astral Foods i.e., Astral Foods and Japan Tobacco go up and down completely randomly.

Pair Corralation between Astral Foods and Japan Tobacco

Assuming the 90 days trading horizon Astral Foods Limited is expected to generate 1.21 times more return on investment than Japan Tobacco. However, Astral Foods is 1.21 times more volatile than Japan Tobacco. It trades about -0.01 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.05 per unit of risk. If you would invest  940.00  in Astral Foods Limited on September 29, 2024 and sell it today you would lose (20.00) from holding Astral Foods Limited or give up 2.13% of portfolio value over 90 days.

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

Astral Foods Limited  vs.  Japan Tobacco

Astral Foods Limited

Risk-Adjusted Performance

0 of 100

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.

Japan Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Astral Foods and Japan Tobacco

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

The idea behind Astral Foods Limited and Japan Tobacco 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.