Correlation Between Archer Daniels and Alico

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

Diversification Opportunities for Archer Daniels and Alico

-0.02

Correlation Coefficient

Archer Daniels  Alico

Good diversification

The 3 months correlation between Archer and Alico is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Alico Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alico Inc 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 Alico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alico Inc has no effect on the direction of Archer Daniels i.e., Archer Daniels and Alico go up and down completely randomly.

Pair Corralation between Archer Daniels and Alico

Considering the 90-day investment horizon Archer Daniels Midland is expected to under-perform the Alico. But the stock apears to be less risky and, when comparing its historical volatility, Archer Daniels Midland is 1.63 times less risky than Alico. The stock trades about -0.01 of its potential returns per unit of risk. The Alico Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,548  in Alico Inc on December 28, 2024 and sell it today you would earn a total of  444.00  from holding Alico Inc or generate 17.43% return on investment over 90 days.

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

Archer Daniels Midland  vs.  Alico Inc

Archer Daniels Midland

Risk-Adjusted Performance

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 very healthy fundamental indicators, Archer Daniels is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Alico Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Alico displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archer Daniels and Alico

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

The idea behind Archer Daniels Midland and Alico Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.