Correlation Between ABSA Bank and Astral Foods

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

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

Diversification Opportunities for ABSA Bank and Astral Foods

0.03

Correlation Coefficient

ABSA Bank  Astral Foods

Significant diversification

The 3 months correlation between ABSA and Astral is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ABSA Bank Limited and Astral Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods and ABSA Bank 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 ABSA Bank Limited 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 ABSA Bank i.e., ABSA Bank and Astral Foods go up and down completely randomly.

Pair Corralation between ABSA Bank and Astral Foods

Assuming the 90 days trading horizon ABSA Bank is expected to generate 587.21 times less return on investment than Astral Foods. But when comparing it to its historical volatility, ABSA Bank Limited is 61.43 times less risky than Astral Foods. It trades about 0.01 of its potential returns per unit of risk. Astral Foods is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,572,024  in Astral Foods on September 5, 2024 and sell it today you would earn a total of  299,076  from holding Astral Foods or generate 19.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

ABSA Bank Limited  vs.  Astral Foods

ABSA Bank Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABSA Bank Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ABSA Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Astral Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods are ranked lower than 7 (%) 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 ABSA Bank and Astral Foods

The main advantage of trading using opposite ABSA Bank and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABSA Bank 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 ABSA Bank Limited 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.