Correlation Between Alto Ingredients and Blue Biofuels

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

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

Diversification Opportunities for Alto Ingredients and Blue Biofuels

-0.42

Correlation Coefficient

Alto Ingredients  Blue Biofuels

Very good diversification

The 3 months correlation between Alto and Blue is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alto Ingredients and Blue Biofuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Biofuels 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 Blue Biofuels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Biofuels has no effect on the direction of Alto Ingredients i.e., Alto Ingredients and Blue Biofuels go up and down completely randomly.

Pair Corralation between Alto Ingredients and Blue Biofuels

Given the investment horizon of 90 days Alto Ingredients is expected to generate 3.3 times less return on investment than Blue Biofuels. But when comparing it to its historical volatility, Alto Ingredients is 1.01 times less risky than Blue Biofuels. It trades about 0.01 of its potential returns per unit of risk. Blue Biofuels is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Blue Biofuels on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Blue Biofuels or generate 0.0% return on investment over 90 days.

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

Alto Ingredients  vs.  Blue Biofuels

Alto Ingredients

Risk-Adjusted Performance

0 of 100

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.

Blue Biofuels

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Biofuels are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Blue Biofuels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alto Ingredients and Blue Biofuels

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

The idea behind Alto Ingredients and Blue Biofuels 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.