Correlation Between RCL Foods and Astral Foods

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

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

Diversification Opportunities for RCL Foods and Astral Foods

-0.33

Correlation Coefficient

RCL Foods  Astral Foods

Very good diversification

The 3 months correlation between RCL and Astral is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding RCL Foods and Astral Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods and RCL 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 RCL Foods 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 has no effect on the direction of RCL Foods i.e., RCL Foods and Astral Foods go up and down completely randomly.

Pair Corralation between RCL Foods and Astral Foods

Assuming the 90 days trading horizon RCL Foods is expected to generate 104.15 times less return on investment than Astral Foods. But when comparing it to its historical volatility, RCL Foods is 1.59 times less risky than Astral Foods. It trades about 0.0 of its potential returns per unit of risk. Astral Foods is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,719,000  in Astral Foods on September 3, 2024 and sell it today you would earn a total of  181,000  from holding Astral Foods or generate 10.53% return on investment over 90 days.

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

RCL Foods  vs.  Astral Foods

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.

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 January 2025.

Pair Trading with RCL Foods and Astral Foods

The main advantage of trading using opposite RCL Foods and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCL Foods 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 RCL Foods and Astral 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.