Correlation Between Limoneira and SW Seed

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

By analyzing existing cross correlation between Limoneira Co and SW Seed Company, you can compare the effects of market volatilities on Limoneira and SW Seed 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 SW Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Limoneira and SW Seed.

Diversification Opportunities for Limoneira and SW Seed

0.01

Correlation Coefficient

Limoneira  SW Seed

Significant diversification

The 3 months correlation between Limoneira and SANW is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Limoneira Co and SW Seed Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SW Seed Company 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 SW Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SW Seed Company has no effect on the direction of Limoneira i.e., Limoneira and SW Seed go up and down completely randomly.

Pair Corralation between Limoneira and SW Seed

Given the investment horizon of 90 days Limoneira Co is expected to under-perform the SW Seed. But the stock apears to be less risky and, when comparing its historical volatility, Limoneira Co is 2.42 times less risky than SW Seed. The stock trades about -0.19 of its potential returns per unit of risk. The SW Seed Company is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  843.00  in SW Seed Company on December 29, 2024 and sell it today you would lose (158.00) from holding SW Seed Company or give up 18.74% of portfolio value over 90 days.

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

Limoneira Co  vs.  SW Seed Company

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.

SW Seed Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days SW Seed Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Limoneira and SW Seed

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

The idea behind Limoneira Co and SW Seed Company 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.