Correlation Between Alto Ingredients and REX American
Can any of the company-specific risk be diversified away by investing in both Alto Ingredients and REX American 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 Alto Ingredients and REX American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alto Ingredients and REX American Resources, you can compare the effects of market volatilities on Alto Ingredients and REX American 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 Alto Ingredients with a short position of REX American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Ingredients and REX American.
Diversification Opportunities for Alto Ingredients and REX American
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alto and REX is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Alto Ingredients and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American Resources and Alto Ingredients 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 Alto Ingredients are associated (or correlated) with REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of Alto Ingredients i.e., Alto Ingredients and REX American go up and down completely randomly.
Pair Corralation between Alto Ingredients and REX American
Given the investment horizon of 90 days Alto Ingredients is expected to under-perform the REX American. In addition to that, Alto Ingredients is 3.76 times more volatile than REX American Resources. It trades about -0.02 of its total potential returns per unit of risk. REX American Resources is currently generating about -0.06 per unit of volatility. If you would invest 4,491 in REX American Resources on August 31, 2024 and sell it today you would lose (166.00) from holding REX American Resources or give up 3.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alto Ingredients vs. REX American Resources
Performance |
| Timeline |
| Alto Ingredients |
| REX American Resources |
Alto Ingredients and REX American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alto Ingredients and REX American
The main advantage of trading using opposite Alto Ingredients and REX American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Ingredients position performs unexpectedly, REX American 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 REX American will offset losses from the drop in REX American's long position.| Alto Ingredients vs. Oil Dri | Alto Ingredients vs. FutureFuel Corp | Alto Ingredients vs. Quaker Chemical | Alto Ingredients vs. Koppers Holdings |
| REX American vs. Innospec | REX American vs. H B Fuller | REX American vs. Quaker Chemical | REX American vs. Minerals Technologies |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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