Correlation Between Archer Daniels and 22nd Century

Can any of the company-specific risk be diversified away by investing in both Archer Daniels and 22nd Century 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 22nd Century 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 22nd Century Group, you can compare the effects of market volatilities on Archer Daniels and 22nd Century 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 22nd Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and 22nd Century.

Diversification Opportunities for Archer Daniels and 22nd Century

0.83

Correlation Coefficient

Archer Daniels  22nd Century

Very poor diversification

The 3 months correlation between Archer and 22nd is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and 22nd Century Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 22nd Century Group 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 22nd Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 22nd Century Group has no effect on the direction of Archer Daniels i.e., Archer Daniels and 22nd Century go up and down completely randomly.

Pair Corralation between Archer Daniels and 22nd Century

Considering the 90-day investment horizon Archer Daniels is expected to generate 5.45 times less return on investment than 22nd Century. But when comparing it to its historical volatility, Archer Daniels Midland is 5.08 times less risky than 22nd Century. It trades about 0.03 of its potential returns per unit of risk. 22nd Century Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  10.00  in 22nd Century Group on September 2, 2024 and sell it today you would lose (0.10) from holding 22nd Century Group or give up 1.0% of portfolio value over 90 days.

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

Archer Daniels Midland  vs.  22nd Century Group

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.

22nd Century Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 22nd Century Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Archer Daniels and 22nd Century

The main advantage of trading using opposite Archer Daniels and 22nd Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Daniels position performs unexpectedly, 22nd Century 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 22nd Century will offset losses from the drop in 22nd Century's long position.

The idea behind Archer Daniels Midland and 22nd Century Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.