Correlation Between Edible Garden and Archer Daniels
Can any of the company-specific risk be diversified away by investing in both Edible Garden 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 Edible Garden and Archer Daniels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edible Garden AG and Archer Daniels Midland, you can compare the effects of market volatilities on Edible Garden 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 Edible Garden with a short position of Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edible Garden and Archer Daniels.
Diversification Opportunities for Edible Garden and Archer Daniels
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edible and Archer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG 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 Edible Garden 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 Edible Garden AG 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 Edible Garden i.e., Edible Garden and Archer Daniels go up and down completely randomly.
Pair Corralation between Edible Garden and Archer Daniels
Given the investment horizon of 90 days Edible Garden AG is expected to under-perform the Archer Daniels. In addition to that, Edible Garden is 5.34 times more volatile than Archer Daniels Midland. It trades about -0.1 of its total potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.04 per unit of volatility. If you would invest 8,570 in Archer Daniels Midland on August 27, 2024 and sell it today you would lose (3,257) from holding Archer Daniels Midland or give up 38.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edible Garden AG vs. Archer Daniels Midland
Performance |
| Timeline |
| Edible Garden AG |
| Archer Daniels Midland |
Edible Garden and Archer Daniels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edible Garden and Archer Daniels
The main advantage of trading using opposite Edible Garden and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edible Garden 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.| Edible Garden vs. Golden Agri Resources | Edible Garden vs. Vital Farms | Edible Garden vs. Local Bounti Corp | Edible Garden vs. Fresh Del Monte |
| Archer Daniels vs. Adecoagro SA | Archer Daniels vs. Cal Maine Foods | Archer Daniels vs. Tyson Foods | Archer Daniels vs. Fresh Del Monte |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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