Correlation Between Astral Foods and Air China

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

Diversification Opportunities for Astral Foods and Air China

0.67

Correlation Coefficient

Astral Foods  Air China

Poor diversification

The 3 months correlation between Astral and Air is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Astral Foods Limited and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of Astral Foods i.e., Astral Foods and Air China go up and down completely randomly.

Pair Corralation between Astral Foods and Air China

Assuming the 90 days trading horizon Astral Foods Limited is expected to generate 0.98 times more return on investment than Air China. However, Astral Foods Limited is 1.02 times less risky than Air China. It trades about 0.02 of its potential returns per unit of risk. Air China Limited is currently generating about -0.01 per unit of risk. If you would invest  805.00  in Astral Foods Limited on October 11, 2024 and sell it today you would earn a total of  100.00  from holding Astral Foods Limited or generate 12.42% return on investment over 90 days.

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

Astral Foods Limited  vs.  Air China Limited

Astral Foods Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Air China Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Air China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astral Foods and Air China

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

The idea behind Astral Foods Limited and Air China 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.