Correlation Between Archer Daniels and Mowi ASA

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

Diversification Opportunities for Archer Daniels and Mowi ASA

-0.26

Correlation Coefficient

Archer Daniels  Mowi ASA

Very good diversification

The 3 months correlation between Archer and Mowi is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Mowi ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA ADR 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 Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA ADR has no effect on the direction of Archer Daniels i.e., Archer Daniels and Mowi ASA go up and down completely randomly.

Pair Corralation between Archer Daniels and Mowi ASA

Considering the 90-day investment horizon Archer Daniels Midland is expected to under-perform the Mowi ASA. In addition to that, Archer Daniels is 1.14 times more volatile than Mowi ASA ADR. It trades about -0.05 of its total potential returns per unit of risk. Mowi ASA ADR is currently generating about 0.11 per unit of volatility. If you would invest  1,681  in Mowi ASA ADR on September 14, 2024 and sell it today you would earn a total of  80.00  from holding Mowi ASA ADR or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	6.07%
Values	Daily Returns

Archer Daniels Midland  vs.  Mowi ASA ADR

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.

Mowi ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mowi ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mowi ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Archer Daniels and Mowi ASA

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

The idea behind Archer Daniels Midland and Mowi ASA ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.