Correlation Between Organto Foods and Calavo Growers

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

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

Diversification Opportunities for Organto Foods and Calavo Growers

-0.43

Correlation Coefficient

Organto Foods  Calavo Growers

Very good diversification

The 3 months correlation between Organto and Calavo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Organto Foods and Calavo Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calavo Growers and Organto Foods 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 Organto Foods are associated (or correlated) with Calavo Growers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calavo Growers has no effect on the direction of Organto Foods i.e., Organto Foods and Calavo Growers go up and down completely randomly.

Pair Corralation between Organto Foods and Calavo Growers

Assuming the 90 days horizon Organto Foods is expected to generate 39.94 times more return on investment than Calavo Growers. However, Organto Foods is 39.94 times more volatile than Calavo Growers. It trades about 0.17 of its potential returns per unit of risk. Calavo Growers is currently generating about -0.01 per unit of risk. If you would invest  1.01  in Organto Foods on December 29, 2024 and sell it today you would earn a total of  9.99  from holding Organto Foods or generate 989.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.85%
Values	Daily Returns

Organto Foods  vs.  Calavo Growers

Organto Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Organto Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Organto Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Calavo Growers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calavo Growers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Calavo Growers is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Organto Foods and Calavo Growers

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

The idea behind Organto Foods and Calavo Growers 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.