Correlation Between Archer Daniels and Canadian Utilities

Can any of the company-specific risk be diversified away by investing in both Archer Daniels and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Limited, you can compare the effects of market volatilities on Archer Daniels and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Canadian Utilities.

Diversification Opportunities for Archer Daniels and Canadian Utilities

0.15

Correlation Coefficient

Archer Daniels  Canadian Utilities

Average diversification

The 3 months correlation between Archer and Canadian is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Archer Daniels i.e., Archer Daniels and Canadian Utilities go up and down completely randomly.

Pair Corralation between Archer Daniels and Canadian Utilities

Assuming the 90 days trading horizon Archer Daniels Midland is expected to generate 0.89 times more return on investment than Canadian Utilities. However, Archer Daniels Midland is 1.12 times less risky than Canadian Utilities. It trades about -0.16 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.16 per unit of risk. If you would invest  4,974  in Archer Daniels Midland on October 9, 2024 and sell it today you would lose (134.00) from holding Archer Daniels Midland or give up 2.69% of portfolio value over 90 days.

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

Archer Daniels Midland  vs.  Canadian Utilities Limited

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. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Canadian Utilities

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Archer Daniels and Canadian Utilities

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

The idea behind Archer Daniels Midland and Canadian Utilities 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.