Correlation Between Alto Ingredients and Rogers

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

By analyzing existing cross correlation between Alto Ingredients and Rogers, you can compare the effects of market volatilities on Alto Ingredients and Rogers 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 Rogers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Ingredients and Rogers.

Diversification Opportunities for Alto Ingredients and Rogers

0.18

Correlation Coefficient

Alto Ingredients  Rogers

Average diversification

The 3 months correlation between Alto and Rogers is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alto Ingredients and Rogers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rogers 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 Rogers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rogers has no effect on the direction of Alto Ingredients i.e., Alto Ingredients and Rogers go up and down completely randomly.

Pair Corralation between Alto Ingredients and Rogers

Given the investment horizon of 90 days Alto Ingredients is expected to generate 1.72 times more return on investment than Rogers. However, Alto Ingredients is 1.72 times more volatile than Rogers. It trades about 0.24 of its potential returns per unit of risk. Rogers is currently generating about -0.01 per unit of risk. If you would invest  162.00  in Alto Ingredients on July 23, 2024 and sell it today you would earn a total of  26.50  from holding Alto Ingredients or generate 16.36% return on investment over 90 days.

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

Alto Ingredients  vs.  Rogers

Alto Ingredients

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Alto Ingredients displayed solid returns over the last few months and may actually be approaching a breakup point.

Rogers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alto Ingredients and Rogers

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

The idea behind Alto Ingredients and Rogers 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.