Correlation Between Edible Garden and Mowi ASA

Can any of the company-specific risk be diversified away by investing in both Edible Garden and Mowi ASA 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 Mowi ASA 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 Mowi ASA, you can compare the effects of market volatilities on Edible Garden and Mowi ASA 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 Mowi ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edible Garden and Mowi ASA.

Diversification Opportunities for Edible Garden and Mowi ASA

-0.1

Correlation Coefficient

Edible Garden  Mowi ASA

Good diversification

The 3 months correlation between Edible and Mowi is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG and Mowi ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mowi ASA 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 Mowi ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mowi ASA has no effect on the direction of Edible Garden i.e., Edible Garden and Mowi ASA go up and down completely randomly.

Pair Corralation between Edible Garden and Mowi ASA

Given the investment horizon of 90 days Edible Garden AG is expected to generate 22.13 times more return on investment than Mowi ASA. However, Edible Garden is 22.13 times more volatile than Mowi ASA. It trades about 0.16 of its potential returns per unit of risk. Mowi ASA is currently generating about 0.12 per unit of risk. If you would invest  19.00  in Edible Garden AG on September 26, 2024 and sell it today you would earn a total of  17.00  from holding Edible Garden AG or generate 89.47% return on investment over 90 days.

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

Edible Garden AG  vs.  Mowi ASA

Edible Garden AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Edible Garden disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mowi ASA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mowi ASA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mowi ASA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Edible Garden and Mowi ASA

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

The idea behind Edible Garden AG and Mowi ASA 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.