Correlation Between Archer Daniels and Dole PLC

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

Diversification Opportunities for Archer Daniels and Dole PLC

0.59

Correlation Coefficient

Archer Daniels  Dole PLC

Very weak diversification

The 3 months correlation between Archer and Dole is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Dole PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dole PLC 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 Dole PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dole PLC has no effect on the direction of Archer Daniels i.e., Archer Daniels and Dole PLC go up and down completely randomly.

Pair Corralation between Archer Daniels and Dole PLC

Considering the 90-day investment horizon Archer Daniels Midland is expected to generate 0.76 times more return on investment than Dole PLC. However, Archer Daniels Midland is 1.32 times less risky than Dole PLC. It trades about -0.11 of its potential returns per unit of risk. Dole PLC is currently generating about -0.09 per unit of risk. If you would invest  5,737  in Archer Daniels Midland on September 13, 2024 and sell it today you would lose (429.00) from holding Archer Daniels Midland or give up 7.48% of portfolio value over 90 days.

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

Archer Daniels Midland  vs.  Dole PLC

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 unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Dole PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dole PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Archer Daniels and Dole PLC

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

The idea behind Archer Daniels Midland and Dole PLC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.