Correlation Between Archer Daniels and Cass Information

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

By analyzing existing cross correlation between Archer Daniels Midland and Cass Information Systems, you can compare the effects of market volatilities on Archer Daniels and Cass Information 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 Archer Daniels with a short position of Cass Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Cass Information.

Diversification Opportunities for Archer Daniels and Cass Information

-0.69

Correlation Coefficient

Archer Daniels  Cass Information

Excellent diversification

The 3 months correlation between Archer and Cass is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems and Archer Daniels 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 Archer Daniels Midland are associated (or correlated) with Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Archer Daniels i.e., Archer Daniels and Cass Information go up and down completely randomly.

Pair Corralation between Archer Daniels and Cass Information

Assuming the 90 days horizon Archer Daniels Midland is expected to under-perform the Cass Information. But the stock apears to be less risky and, when comparing its historical volatility, Archer Daniels Midland is 1.05 times less risky than Cass Information. The stock trades about -0.05 of its potential returns per unit of risk. The Cass Information Systems is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,653  in Cass Information Systems on September 13, 2024 and sell it today you would earn a total of  507.00  from holding Cass Information Systems or generate 13.88% return on investment over 90 days.

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

Archer Daniels Midland  vs.  Cass Information Systems

Archer Daniels Midland

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cass Information Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cass Information reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archer Daniels and Cass Information

The main advantage of trading using opposite Archer Daniels and Cass Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Daniels position performs unexpectedly, Cass Information 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 Cass Information will offset losses from the drop in Cass Information's long position.

The idea behind Archer Daniels Midland and Cass Information Systems 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.