Correlation Between Centrotec and Astral Foods

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

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

Diversification Opportunities for Centrotec and Astral Foods

0.75

Correlation Coefficient

Centrotec  Astral Foods

Poor diversification

The 3 months correlation between Centrotec and Astral is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Centrotec SE and Astral Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods Limited and Centrotec 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 Centrotec SE 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 Limited has no effect on the direction of Centrotec i.e., Centrotec and Astral Foods go up and down completely randomly.

Pair Corralation between Centrotec and Astral Foods

Assuming the 90 days trading horizon Centrotec is expected to generate 9.58 times less return on investment than Astral Foods. But when comparing it to its historical volatility, Centrotec SE is 11.75 times less risky than Astral Foods. It trades about 0.17 of its potential returns per unit of risk. Astral Foods Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  360.00  in Astral Foods Limited on October 26, 2024 and sell it today you would earn a total of  515.00  from holding Astral Foods Limited or generate 143.06% return on investment over 90 days.

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

Centrotec SE  vs.  Astral Foods Limited

Centrotec SE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Centrotec SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Centrotec displayed solid returns over the last few months and may actually be approaching a breakup point.

Astral Foods Limited

Risk-Adjusted Performance

10 of 100

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. In spite of comparatively fragile basic indicators, Astral Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrotec and Astral Foods

The main advantage of trading using opposite Centrotec and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrotec 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 Centrotec SE and Astral Foods 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.