Correlation Between Continental Resources and Alto Ingredients

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

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

Diversification Opportunities for Continental Resources and Alto Ingredients

-0.18

Correlation Coefficient

Continental Resources  Alto Ingredients

Good diversification

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

Pair Corralation between Continental Resources and Alto Ingredients

If you would invest  7,427  in Continental Resources on January 30, 2024 and sell it today you would earn a total of  0.00  from holding Continental Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Continental Resources  vs.  Alto Ingredients

Continental Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Continental Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Continental Resources is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Alto Ingredients

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Continental Resources and Alto Ingredients

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

The idea behind Continental Resources and Alto 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.