Correlation Between Oil Dri and Alto Ingredients

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

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

Diversification Opportunities for Oil Dri and Alto Ingredients

-0.31

Correlation Coefficient

Oil Dri  Alto Ingredients

Very good diversification

The 3 months correlation between Oil and Alto is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients and Oil Dri 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 Oil Dri are associated (or correlated) with Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of Oil Dri i.e., Oil Dri and Alto Ingredients go up and down completely randomly.

Pair Corralation between Oil Dri and Alto Ingredients

Considering the 90-day investment horizon Oil Dri is expected to generate 0.49 times more return on investment than Alto Ingredients. However, Oil Dri is 2.04 times less risky than Alto Ingredients. It trades about 0.06 of its potential returns per unit of risk. Alto Ingredients is currently generating about -0.01 per unit of risk. If you would invest  4,539  in Oil Dri on December 17, 2024 and sell it today you would earn a total of  288.00  from holding Oil Dri or generate 6.35% return on investment over 90 days.

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

Oil Dri  vs.  Alto Ingredients

Oil Dri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Oil Dri may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alto Ingredients

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Oil Dri and Alto Ingredients

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

The idea behind Oil Dri and Alto Ingredients 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.