Correlation Between Alico and Golden Agri-Resources

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

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

Diversification Opportunities for Alico and Golden Agri-Resources

0.28

Correlation Coefficient

Alico  Golden Agri-Resources

Modest diversification

The 3 months correlation between Alico and Golden is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources and Alico 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 Alico Inc are associated (or correlated) with Golden Agri-Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of Alico i.e., Alico and Golden Agri-Resources go up and down completely randomly.

Pair Corralation between Alico and Golden Agri-Resources

Given the investment horizon of 90 days Alico is expected to generate 1.23 times less return on investment than Golden Agri-Resources. But when comparing it to its historical volatility, Alico Inc is 3.73 times less risky than Golden Agri-Resources. It trades about 0.06 of its potential returns per unit of risk. Golden Agri Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Golden Agri Resources on November 29, 2024 and sell it today you would lose (3.00) from holding Golden Agri Resources or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.33%
Values	Daily Returns

Alico Inc  vs.  Golden Agri Resources

Alico Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Alico may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Golden Agri Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Golden Agri-Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alico and Golden Agri-Resources

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

The idea behind Alico Inc and Golden Agri Resources 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.