Correlation Between Aryzta AG and Golden Agri-Resources

Can any of the company-specific risk be diversified away by investing in both Aryzta AG 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 Aryzta AG 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 Aryzta AG PK and Golden Agri Resources, you can compare the effects of market volatilities on Aryzta AG 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 Aryzta AG with a short position of Golden Agri-Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aryzta AG and Golden Agri-Resources.

Diversification Opportunities for Aryzta AG and Golden Agri-Resources

-0.05

Correlation Coefficient

Aryzta AG  Golden Agri-Resources

Good diversification

The 3 months correlation between Aryzta and Golden is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aryzta AG PK 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 Aryzta AG 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 Aryzta AG PK 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 Aryzta AG i.e., Aryzta AG and Golden Agri-Resources go up and down completely randomly.

Pair Corralation between Aryzta AG and Golden Agri-Resources

Assuming the 90 days horizon Aryzta AG PK is expected to generate 0.56 times more return on investment than Golden Agri-Resources. However, Aryzta AG PK is 1.78 times less risky than Golden Agri-Resources. It trades about 0.11 of its potential returns per unit of risk. Golden Agri Resources is currently generating about 0.05 per unit of risk. If you would invest  86.00  in Aryzta AG PK on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Aryzta AG PK or generate 27.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.44%
Values	Daily Returns

Aryzta AG PK  vs.  Golden Agri Resources

Aryzta AG PK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aryzta AG PK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Aryzta AG showed solid returns over the last few months and may actually be approaching a breakup point.

Golden Agri Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 4 (%) 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 Aryzta AG and Golden Agri-Resources

The main advantage of trading using opposite Aryzta AG and Golden Agri-Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aryzta AG 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 Aryzta AG PK 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.