Correlation Between Alico and NaturalShrimp

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

By analyzing existing cross correlation between Alico Inc and NaturalShrimp, you can compare the effects of market volatilities on Alico and NaturalShrimp 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 Alico with a short position of NaturalShrimp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alico and NaturalShrimp.

Diversification Opportunities for Alico and NaturalShrimp

-0.14

Correlation Coefficient

Alico  NaturalShrimp

Good diversification

The 3 months correlation between Alico and NaturalShrimp is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and NaturalShrimp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NaturalShrimp and Alico 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 Alico Inc are associated (or correlated) with NaturalShrimp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NaturalShrimp has no effect on the direction of Alico i.e., Alico and NaturalShrimp go up and down completely randomly.

Pair Corralation between Alico and NaturalShrimp

Given the investment horizon of 90 days Alico Inc is expected to under-perform the NaturalShrimp. But the stock apears to be less risky and, when comparing its historical volatility, Alico Inc is 6.48 times less risky than NaturalShrimp. The stock trades about -0.04 of its potential returns per unit of risk. The NaturalShrimp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.00  in NaturalShrimp on February 5, 2024 and sell it today you would earn a total of  0.07  from holding NaturalShrimp or generate 7.0% return on investment over 90 days.

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

Alico Inc  vs.  NaturalShrimp

Alico Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Alico is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NaturalShrimp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NaturalShrimp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, NaturalShrimp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alico and NaturalShrimp

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

The idea behind Alico Inc and NaturalShrimp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.