Correlation Between Woolworths Holdings and Astral Foods

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

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

Diversification Opportunities for Woolworths Holdings and Astral Foods

-0.48

Correlation Coefficient

Woolworths Holdings  Astral Foods

Very good diversification

The 3 months correlation between Woolworths and Astral is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Woolworths Holdings and Astral Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astral Foods and Woolworths Holdings 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 Woolworths Holdings 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 Woolworths Holdings i.e., Woolworths Holdings and Astral Foods go up and down completely randomly.

Pair Corralation between Woolworths Holdings and Astral Foods

Assuming the 90 days trading horizon Woolworths Holdings is expected to under-perform the Astral Foods. But the stock apears to be less risky and, when comparing its historical volatility, Woolworths Holdings is 1.03 times less risky than Astral Foods. The stock trades about -0.22 of its potential returns per unit of risk. The Astral Foods is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,882,800  in Astral Foods on October 9, 2024 and sell it today you would lose (71,500) from holding Astral Foods or give up 3.8% of portfolio value over 90 days.

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

Woolworths Holdings  vs.  Astral Foods

Woolworths Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Astral Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Astral Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Woolworths Holdings and Astral Foods

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

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.