Correlation Between Limoneira and Archer Daniels

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

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

Diversification Opportunities for Limoneira and Archer Daniels

0.83

Correlation Coefficient

Limoneira  Archer Daniels

Very poor diversification

The 3 months correlation between Limoneira and Archer is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Limoneira Co and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Limoneira i.e., Limoneira and Archer Daniels go up and down completely randomly.

Pair Corralation between Limoneira and Archer Daniels

Given the investment horizon of 90 days Limoneira Co is expected to generate 1.25 times more return on investment than Archer Daniels. However, Limoneira is 1.25 times more volatile than Archer Daniels Midland. It trades about 0.07 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.02 per unit of risk. If you would invest  1,051  in Limoneira Co on February 3, 2024 and sell it today you would earn a total of  1,094  from holding Limoneira Co or generate 104.09% return on investment over 90 days.

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

Limoneira Co  vs.  Archer Daniels Midland

Limoneira

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Limoneira Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Limoneira reported solid returns over the last few months and may actually be approaching a breakup point.

Archer Daniels Midland

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Daniels Midland are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Archer Daniels may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Limoneira and Archer Daniels

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

The idea behind Limoneira Co and Archer Daniels Midland 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.