Correlation Between Astral Foods and RCL Foods

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

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

Diversification Opportunities for Astral Foods and RCL Foods

-0.33

Correlation Coefficient

Astral Foods  RCL Foods

Very good diversification

The 3 months correlation between Astral and RCL is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Astral Foods and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods 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 are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Astral Foods i.e., Astral Foods and RCL Foods go up and down completely randomly.

Pair Corralation between Astral Foods and RCL Foods

Assuming the 90 days trading horizon Astral Foods is expected to generate 1.59 times more return on investment than RCL Foods. However, Astral Foods is 1.59 times more volatile than RCL Foods. It trades about 0.31 of its potential returns per unit of risk. RCL Foods is currently generating about 0.0 per unit of risk. If you would invest  1,717,300  in Astral Foods on September 1, 2024 and sell it today you would earn a total of  182,700  from holding Astral Foods or generate 10.64% return on investment over 90 days.

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

Astral Foods  vs.  RCL Foods

Astral Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Astral Foods may actually be approaching a critical reversion point that can send shares even higher in December 2024.

RCL Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RCL Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RCL Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Astral Foods and RCL Foods

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

The idea behind Astral Foods and RCL Foods 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.