Correlation Between Tejon Ranch and Limoneira

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

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

Diversification Opportunities for Tejon Ranch and Limoneira

-0.25

Correlation Coefficient

Tejon Ranch  Limoneira

Very good diversification

The 3 months correlation between Tejon and Limoneira is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tejon Ranch Co and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira and Tejon Ranch 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 Tejon Ranch Co 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 Tejon Ranch i.e., Tejon Ranch and Limoneira go up and down completely randomly.

Pair Corralation between Tejon Ranch and Limoneira

Considering the 90-day investment horizon Tejon Ranch Co is expected to generate 0.72 times more return on investment than Limoneira. However, Tejon Ranch Co is 1.38 times less risky than Limoneira. It trades about 0.05 of its potential returns per unit of risk. Limoneira Co is currently generating about -0.2 per unit of risk. If you would invest  1,582  in Tejon Ranch Co on December 28, 2024 and sell it today you would earn a total of  65.00  from holding Tejon Ranch Co or generate 4.11% return on investment over 90 days.

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

Tejon Ranch Co  vs.  Limoneira Co

Tejon Ranch

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tejon Ranch Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Tejon Ranch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Tejon Ranch and Limoneira

The main advantage of trading using opposite Tejon Ranch and Limoneira positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tejon Ranch 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 Tejon Ranch Co 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.