Correlation Between Calavo Growers and Organto Foods

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

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

Diversification Opportunities for Calavo Growers and Organto Foods

0.27

Correlation Coefficient

Calavo Growers  Organto Foods

Modest diversification

The 3 months correlation between Calavo and Organto is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Calavo Growers and Organto Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organto Foods and Calavo Growers 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 Calavo Growers are associated (or correlated) with Organto Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organto Foods has no effect on the direction of Calavo Growers i.e., Calavo Growers and Organto Foods go up and down completely randomly.

Pair Corralation between Calavo Growers and Organto Foods

Given the investment horizon of 90 days Calavo Growers is expected to generate 0.29 times more return on investment than Organto Foods. However, Calavo Growers is 3.46 times less risky than Organto Foods. It trades about -0.06 of its potential returns per unit of risk. Organto Foods is currently generating about -0.17 per unit of risk. If you would invest  2,882  in Calavo Growers on September 13, 2024 and sell it today you would lose (185.00) from holding Calavo Growers or give up 6.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Calavo Growers  vs.  Organto Foods

Calavo Growers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calavo Growers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Calavo Growers is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Organto Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organto Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Calavo Growers and Organto Foods

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

The idea behind Calavo Growers and Organto Foods 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.