Correlation Between Astral Foods and Nintendo

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

Diversification Opportunities for Astral Foods and Nintendo

0.62

Correlation Coefficient

Astral Foods  Nintendo

Poor diversification

The 3 months correlation between Astral and Nintendo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Astral Foods Limited and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo 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 Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo has no effect on the direction of Astral Foods i.e., Astral Foods and Nintendo go up and down completely randomly.

Pair Corralation between Astral Foods and Nintendo

Assuming the 90 days trading horizon Astral Foods is expected to generate 1.72 times less return on investment than Nintendo. But when comparing it to its historical volatility, Astral Foods Limited is 1.98 times less risky than Nintendo. It trades about 0.1 of its potential returns per unit of risk. Nintendo Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,184  in Nintendo Co on September 16, 2024 and sell it today you would earn a total of  206.00  from holding Nintendo Co or generate 17.4% 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.  Nintendo Co

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.

Nintendo

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astral Foods and Nintendo

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

The idea behind Astral Foods Limited and Nintendo Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.