Correlation Between DexCom and Astral Foods

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

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

Diversification Opportunities for DexCom and Astral Foods

0.2

Correlation Coefficient

DexCom  Astral Foods

Modest diversification

The 3 months correlation between DexCom and Astral is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Astral Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods Limited and DexCom 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 DexCom Inc are associated (or correlated) with Astral Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astral Foods Limited has no effect on the direction of DexCom i.e., DexCom and Astral Foods go up and down completely randomly.

Pair Corralation between DexCom and Astral Foods

Assuming the 90 days horizon DexCom Inc is expected to generate 1.2 times more return on investment than Astral Foods. However, DexCom is 1.2 times more volatile than Astral Foods Limited. It trades about 0.31 of its potential returns per unit of risk. Astral Foods Limited is currently generating about 0.2 per unit of risk. If you would invest  6,407  in DexCom Inc on September 5, 2024 and sell it today you would earn a total of  1,099  from holding DexCom Inc or generate 17.15% return on investment over 90 days.

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

DexCom Inc  vs.  Astral Foods Limited

DexCom Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DexCom reported solid returns over the last few months and may actually be approaching a breakup point.

Astral Foods Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Astral Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DexCom and Astral Foods

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

The idea behind DexCom Inc and Astral 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.