Correlation Between Fresh Del and African Agriculture
Can any of the company-specific risk be diversified away by investing in both Fresh Del and African Agriculture 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 Fresh Del and African Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fresh Del Monte and African Agriculture Holdings, you can compare the effects of market volatilities on Fresh Del and African Agriculture 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 Fresh Del with a short position of African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Del and African Agriculture.
Diversification Opportunities for Fresh Del and African Agriculture
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fresh and African is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture and Fresh Del 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 Fresh Del Monte are associated (or correlated) with African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of Fresh Del i.e., Fresh Del and African Agriculture go up and down completely randomly.
Pair Corralation between Fresh Del and African Agriculture
Considering the 90-day investment horizon Fresh Del Monte is expected to generate 0.08 times more return on investment than African Agriculture. However, Fresh Del Monte is 12.68 times less risky than African Agriculture. It trades about 0.13 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about -0.28 per unit of risk. If you would invest 2,943 in Fresh Del Monte on September 2, 2024 and sell it today you would earn a total of 432.00 from holding Fresh Del Monte or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 31.25% |
| Values | Daily Returns |
Fresh Del Monte vs. African Agriculture Holdings
Performance |
| Timeline |
| Fresh Del Monte |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fresh Del and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fresh Del and African Agriculture
The main advantage of trading using opposite Fresh Del and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.The idea behind Fresh Del Monte and African Agriculture Holdings 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.| African Agriculture vs. Willamette Valley Vineyards | African Agriculture vs. NetEase | African Agriculture vs. Philip Morris International | African Agriculture vs. Keurig Dr Pepper |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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