Correlation Between Limoneira and Edible Garden

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

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

Diversification Opportunities for Limoneira and Edible Garden

0.73

Correlation Coefficient

Limoneira  Edible Garden

Poor diversification

The 3 months correlation between Limoneira and Edible is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Limoneira Co and Edible Garden AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edible Garden AG and Limoneira 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 Limoneira Co are associated (or correlated) with Edible Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edible Garden AG has no effect on the direction of Limoneira i.e., Limoneira and Edible Garden go up and down completely randomly.

Pair Corralation between Limoneira and Edible Garden

Given the investment horizon of 90 days Limoneira Co is expected to generate 0.25 times more return on investment than Edible Garden. However, Limoneira Co is 4.07 times less risky than Edible Garden. It trades about -0.19 of its potential returns per unit of risk. Edible Garden AG is currently generating about -0.1 per unit of risk. If you would invest  2,406  in Limoneira Co on December 29, 2024 and sell it today you would lose (617.00) from holding Limoneira Co or give up 25.64% of portfolio value over 90 days.

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

Limoneira Co  vs.  Edible Garden AG

Limoneira

Risk-Adjusted Performance

Very Weak

Over the last 90 days Limoneira Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Edible Garden AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edible Garden AG 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 fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Limoneira and Edible Garden

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

The idea behind Limoneira Co and Edible Garden AG 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.