Correlation Between Fresh Del and Archer Daniels

Can any of the company-specific risk be diversified away by investing in both Fresh Del 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 Fresh Del and Archer Daniels 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 Archer Daniels Midland, you can compare the effects of market volatilities on Fresh Del 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 Fresh Del with a short position of Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Del and Archer Daniels.

Diversification Opportunities for Fresh Del and Archer Daniels

0.78

Correlation Coefficient

Fresh Del  Archer Daniels

Poor diversification

The 3 months correlation between Fresh and Archer is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte 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 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 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 Fresh Del i.e., Fresh Del and Archer Daniels go up and down completely randomly.

Pair Corralation between Fresh Del and Archer Daniels

Considering the 90-day investment horizon Fresh Del Monte is expected to generate 0.76 times more return on investment than Archer Daniels. However, Fresh Del Monte is 1.32 times less risky than Archer Daniels. It trades about 0.03 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.02 per unit of risk. If you would invest  2,454  in Fresh Del Monte on January 25, 2024 and sell it today you would earn a total of  132.00  from holding Fresh Del Monte or generate 5.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fresh Del Monte  vs.  Archer Daniels Midland

Fresh Del Monte

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Fresh Del is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Archer Daniels Midland

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Daniels Midland are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Archer Daniels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresh Del and Archer Daniels

The main advantage of trading using opposite Fresh Del and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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.

The idea behind Fresh Del Monte and Archer Daniels Midland 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.