Correlation Between Simply Good and Limoneira

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

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

Diversification Opportunities for Simply Good and Limoneira

-0.14

Correlation Coefficient

Simply Good  Limoneira

Good diversification

The 3 months correlation between Simply and Limoneira is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Simply Good Foods and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira and Simply Good 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 Simply Good Foods 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 Simply Good i.e., Simply Good and Limoneira go up and down completely randomly.

Pair Corralation between Simply Good and Limoneira

Given the investment horizon of 90 days Simply Good Foods is expected to generate 0.5 times more return on investment than Limoneira. However, Simply Good Foods is 2.0 times less risky than Limoneira. It trades about 0.2 of its potential returns per unit of risk. Limoneira Co is currently generating about -0.15 per unit of risk. If you would invest  3,605  in Simply Good Foods on October 7, 2024 and sell it today you would earn a total of  345.00  from holding Simply Good Foods or generate 9.57% return on investment over 90 days.

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

Simply Good Foods  vs.  Limoneira Co

Simply Good Foods

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Simply Good disclosed solid returns over the last few months and may actually be approaching a breakup point.

Limoneira

Risk-Adjusted Performance

0 of 100

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 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 Simply Good and Limoneira

The main advantage of trading using opposite Simply Good and Limoneira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simply Good 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 Simply Good Foods 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 Transaction History module to view history of all your transactions and understand their impact on performance.