Correlation Between Archer Daniels and Jernimo Martins

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

By analyzing existing cross correlation between Archer Daniels Midland and Jernimo Martins SGPS, you can compare the effects of market volatilities on Archer Daniels and Jernimo Martins 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 Archer Daniels with a short position of Jernimo Martins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Jernimo Martins.

Diversification Opportunities for Archer Daniels and Jernimo Martins

-0.49

Correlation Coefficient

Archer Daniels  Jernimo Martins

Very good diversification

The 3 months correlation between Archer and Jernimo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Jernimo Martins SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jernimo Martins SGPS and Archer Daniels 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 Archer Daniels Midland are associated (or correlated) with Jernimo Martins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jernimo Martins SGPS has no effect on the direction of Archer Daniels i.e., Archer Daniels and Jernimo Martins go up and down completely randomly.

Pair Corralation between Archer Daniels and Jernimo Martins

Considering the 90-day investment horizon Archer Daniels Midland is expected to under-perform the Jernimo Martins. In addition to that, Archer Daniels is 1.6 times more volatile than Jernimo Martins SGPS. It trades about -0.02 of its total potential returns per unit of risk. Jernimo Martins SGPS is currently generating about -0.02 per unit of volatility. If you would invest  2,212  in Jernimo Martins SGPS on January 24, 2024 and sell it today you would lose (289.00) from holding Jernimo Martins SGPS or give up 13.07% of portfolio value over 90 days.

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

Archer Daniels Midland  vs.  Jernimo Martins SGPS

Archer Daniels Midland

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Daniels Midland are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Archer Daniels displayed solid returns over the last few months and may actually be approaching a breakup point.

Jernimo Martins SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jernimo Martins SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Archer Daniels and Jernimo Martins

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

The idea behind Archer Daniels Midland and Jernimo Martins SGPS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.