Correlation Between GrainCorp and Limoneira

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

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

Diversification Opportunities for GrainCorp and Limoneira

-0.28

Correlation Coefficient

GrainCorp  Limoneira

Very good diversification

The 3 months correlation between GrainCorp and Limoneira is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding GrainCorp Limited and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira and GrainCorp 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 GrainCorp Limited are associated (or correlated) with Limoneira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limoneira has no effect on the direction of GrainCorp i.e., GrainCorp and Limoneira go up and down completely randomly.

Pair Corralation between GrainCorp and Limoneira

Assuming the 90 days horizon GrainCorp Limited is expected to under-perform the Limoneira. In addition to that, GrainCorp is 1.7 times more volatile than Limoneira Co. It trades about -0.14 of its total potential returns per unit of risk. Limoneira Co is currently generating about 0.04 per unit of volatility. If you would invest  2,590  in Limoneira Co on September 15, 2024 and sell it today you would earn a total of  94.00  from holding Limoneira Co or generate 3.63% return on investment over 90 days.

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

GrainCorp Limited  vs.  Limoneira Co

GrainCorp Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrainCorp Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Limoneira

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Limoneira Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Limoneira is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GrainCorp and Limoneira

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

The idea behind GrainCorp Limited and Limoneira Co 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.