Correlation Between JAPAN AIRLINES and Astral Foods

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

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

Diversification Opportunities for JAPAN AIRLINES and Astral Foods

0.81

Correlation Coefficient

JAPAN AIRLINES  Astral Foods

Very poor diversification

The 3 months correlation between JAPAN and Astral is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES i.e., JAPAN AIRLINES and Astral Foods go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Astral Foods

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the Astral Foods. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 2.4 times less risky than Astral Foods. The stock trades about -0.02 of its potential returns per unit of risk. The Astral Foods Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  915.00  in Astral Foods Limited on October 4, 2024 and sell it today you would lose (5.00) from holding Astral Foods Limited or give up 0.55% of portfolio value over 90 days.

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

JAPAN AIRLINES  vs.  Astral Foods Limited

JAPAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Astral Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Astral Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JAPAN AIRLINES and Astral Foods

The main advantage of trading using opposite JAPAN AIRLINES and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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 JAPAN AIRLINES 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.