Correlation Between Astoria Investments and RCL Foods

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

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

Diversification Opportunities for Astoria Investments and RCL Foods

-0.71

Correlation Coefficient

Astoria Investments  RCL Foods

Pay attention - limited upside

The 3 months correlation between Astoria and RCL is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Astoria Investments and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods and Astoria Investments 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 Astoria Investments are associated (or correlated) with RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Astoria Investments i.e., Astoria Investments and RCL Foods go up and down completely randomly.

Pair Corralation between Astoria Investments and RCL Foods

Assuming the 90 days trading horizon Astoria Investments is expected to generate 1.46 times less return on investment than RCL Foods. But when comparing it to its historical volatility, Astoria Investments is 1.22 times less risky than RCL Foods. It trades about 0.13 of its potential returns per unit of risk. RCL Foods is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  92,200  in RCL Foods on September 15, 2024 and sell it today you would earn a total of  4,100  from holding RCL Foods or generate 4.45% return on investment over 90 days.

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

Astoria Investments  vs.  RCL Foods

Astoria Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astoria Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

RCL Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RCL Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Astoria Investments and RCL Foods

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

The idea behind Astoria Investments and RCL 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.