Correlation Between Alto Ingredients and Equillium

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Can any of the company-specific risk be diversified away by investing in both Alto Ingredients and Equillium 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 Equillium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alto Ingredients and Equillium, you can compare the effects of market volatilities on Alto Ingredients and Equillium 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 Equillium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Ingredients and Equillium.

Diversification Opportunities for Alto Ingredients and Equillium

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Alto and Equillium is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alto Ingredients and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium 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 Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Alto Ingredients i.e., Alto Ingredients and Equillium go up and down completely randomly.

Pair Corralation between Alto Ingredients and Equillium

Given the investment horizon of 90 days Alto Ingredients is expected to generate 0.52 times more return on investment than Equillium. However, Alto Ingredients is 1.94 times less risky than Equillium. It trades about -0.01 of its potential returns per unit of risk. Equillium is currently generating about -0.36 per unit of risk. If you would invest  196.00  in Alto Ingredients on January 22, 2024 and sell it today you would lose (3.00) from holding Alto Ingredients or give up 1.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Alto Ingredients  vs.  Equillium

 Performance 
       Timeline  
Alto Ingredients 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Alto Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alto Ingredients is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Equillium 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Alto Ingredients and Equillium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alto Ingredients and Equillium

The main advantage of trading using opposite Alto Ingredients and Equillium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Ingredients position performs unexpectedly, Equillium 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 Equillium will offset losses from the drop in Equillium's long position.
The idea behind Alto Ingredients and Equillium 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.
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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