Correlation Between Astral Foods and Timken

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

Diversification Opportunities for Astral Foods and Timken

0.67

Correlation Coefficient

Astral Foods  Timken

Poor diversification

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

Pair Corralation between Astral Foods and Timken

Assuming the 90 days horizon Astral Foods is expected to generate 1.67 times less return on investment than Timken. But when comparing it to its historical volatility, Astral Foods Limited is 3.21 times less risky than Timken. It trades about 0.13 of its potential returns per unit of risk. Timken Company is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,046  in Timken Company on December 19, 2024 and sell it today you would earn a total of  442.50  from holding Timken Company or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Astral Foods Limited  vs.  Timken Company

Astral Foods Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Astral Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Timken Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, Timken may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Astral Foods and Timken

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

The idea behind Astral Foods Limited and Timken Company 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.