Correlation Between Edible Garden and Darling Ingredients

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

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

Diversification Opportunities for Edible Garden and Darling Ingredients

-0.44

Correlation Coefficient

Edible Garden  Darling Ingredients

Very good diversification

The 3 months correlation between Edible and Darling is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG and Darling Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darling Ingredients and Edible Garden 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 Edible Garden AG are associated (or correlated) with Darling Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darling Ingredients has no effect on the direction of Edible Garden i.e., Edible Garden and Darling Ingredients go up and down completely randomly.

Pair Corralation between Edible Garden and Darling Ingredients

Given the investment horizon of 90 days Edible Garden AG is expected to generate 5.67 times more return on investment than Darling Ingredients. However, Edible Garden is 5.67 times more volatile than Darling Ingredients. It trades about 0.08 of its potential returns per unit of risk. Darling Ingredients is currently generating about -0.06 per unit of risk. If you would invest  27.00  in Edible Garden AG on September 30, 2024 and sell it today you would earn a total of  8.00  from holding Edible Garden AG or generate 29.63% return on investment over 90 days.

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

Edible Garden AG  vs.  Darling Ingredients

Edible Garden AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Edible Garden disclosed solid returns over the last few months and may actually be approaching a breakup point.

Darling Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darling Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Edible Garden and Darling Ingredients

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

The idea behind Edible Garden AG and Darling Ingredients 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.