Correlation Between Alico and Adecoagro

Can any of the company-specific risk be diversified away by investing in both Alico and Adecoagro 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 Alico and Adecoagro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alico Inc and Adecoagro SA, you can compare the effects of market volatilities on Alico and Adecoagro 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 Alico with a short position of Adecoagro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alico and Adecoagro.

Diversification Opportunities for Alico and Adecoagro

-0.27

Correlation Coefficient

Alico  Adecoagro

Very good diversification

The 3 months correlation between Alico and Adecoagro is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA and Alico 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 Alico Inc are associated (or correlated) with Adecoagro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecoagro SA has no effect on the direction of Alico i.e., Alico and Adecoagro go up and down completely randomly.

Pair Corralation between Alico and Adecoagro

Given the investment horizon of 90 days Alico is expected to generate 1.2 times less return on investment than Adecoagro. In addition to that, Alico is 1.62 times more volatile than Adecoagro SA. It trades about 0.09 of its total potential returns per unit of risk. Adecoagro SA is currently generating about 0.18 per unit of volatility. If you would invest  934.00  in Adecoagro SA on December 30, 2024 and sell it today you would earn a total of  202.00  from holding Adecoagro SA or generate 21.63% return on investment over 90 days.

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

Alico Inc  vs.  Adecoagro SA

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.

Adecoagro SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Adecoagro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alico and Adecoagro

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

The idea behind Alico Inc and Adecoagro SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.