Correlation Between Life Healthcare and Astral Foods

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

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

Diversification Opportunities for Life Healthcare and Astral Foods

0.84

Correlation Coefficient

Life Healthcare  Astral Foods

Very poor diversification

The 3 months correlation between Life and Astral is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and Astral Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods and Life Healthcare 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 Life Healthcare 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 Life Healthcare i.e., Life Healthcare and Astral Foods go up and down completely randomly.

Pair Corralation between Life Healthcare and Astral Foods

Assuming the 90 days trading horizon Life Healthcare is expected to under-perform the Astral Foods. But the stock apears to be less risky and, when comparing its historical volatility, Life Healthcare is 1.15 times less risky than Astral Foods. The stock trades about -0.19 of its potential returns per unit of risk. The Astral Foods is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,713,000  in Astral Foods on December 5, 2024 and sell it today you would lose (47,900) from holding Astral Foods or give up 2.8% of portfolio value over 90 days.

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

Life Healthcare  vs.  Astral Foods

Life Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Life Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Astral Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astral Foods 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.

Pair Trading with Life Healthcare and Astral Foods

The main advantage of trading using opposite Life Healthcare and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare 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 Life Healthcare 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.