Correlation Between Alico and Arcadia Biosciences

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

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

Diversification Opportunities for Alico and Arcadia Biosciences

-0.24

Correlation Coefficient

Alico  Arcadia Biosciences

Very good diversification

The 3 months correlation between Alico and Arcadia is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Arcadia Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadia Biosciences 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 Arcadia Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadia Biosciences has no effect on the direction of Alico i.e., Alico and Arcadia Biosciences go up and down completely randomly.

Pair Corralation between Alico and Arcadia Biosciences

Given the investment horizon of 90 days Alico is expected to generate 2.09 times less return on investment than Arcadia Biosciences. But when comparing it to its historical volatility, Alico Inc is 3.75 times less risky than Arcadia Biosciences. It trades about 0.02 of its potential returns per unit of risk. Arcadia Biosciences is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,096  in Arcadia Biosciences on September 12, 2024 and sell it today you would lose (492.00) from holding Arcadia Biosciences or give up 44.89% of portfolio value over 90 days.

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

Alico Inc  vs.  Arcadia Biosciences

Alico Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alico Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Alico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Arcadia Biosciences

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadia Biosciences are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Arcadia Biosciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alico and Arcadia Biosciences

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

The idea behind Alico Inc and Arcadia Biosciences 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.

Check out your portfolio center.

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.