Correlation Between TreeHouse Foods and Astral Foods

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

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

Diversification Opportunities for TreeHouse Foods and Astral Foods

-0.16

Correlation Coefficient

TreeHouse Foods  Astral Foods

Good diversification

The 3 months correlation between TreeHouse and Astral is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding TreeHouse Foods 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 TreeHouse 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 TreeHouse Foods 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 TreeHouse Foods i.e., TreeHouse Foods and Astral Foods go up and down completely randomly.

Pair Corralation between TreeHouse Foods and Astral Foods

Assuming the 90 days horizon TreeHouse Foods is expected to under-perform the Astral Foods. But the stock apears to be less risky and, when comparing its historical volatility, TreeHouse Foods is 1.5 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TreeHouse Foods  vs.  Astral Foods Limited

TreeHouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TreeHouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TreeHouse Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TreeHouse Foods and Astral Foods

The main advantage of trading using opposite TreeHouse Foods and Astral Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TreeHouse Foods 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 TreeHouse Foods 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.