Correlation Between Golden Agri-Resources and Bunge

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

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

Diversification Opportunities for Golden Agri-Resources and Bunge

-0.26

Correlation Coefficient

Golden Agri-Resources  Bunge

Very good diversification

The 3 months correlation between Golden and Bunge is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Golden Agri-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 Golden Agri Resources are associated (or correlated) with Bunge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunge Limited has no effect on the direction of Golden Agri-Resources i.e., Golden Agri-Resources and Bunge go up and down completely randomly.

Pair Corralation between Golden Agri-Resources and Bunge

Assuming the 90 days horizon Golden Agri Resources is expected to generate 4.85 times more return on investment than Bunge. However, Golden Agri-Resources is 4.85 times more volatile than Bunge Limited. It trades about 0.05 of its potential returns per unit of risk. Bunge Limited is currently generating about -0.04 per unit of risk. If you would invest  19.00  in Golden Agri Resources on December 27, 2024 and sell it today you would earn a total of  1.00  from holding Golden Agri Resources or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Golden Agri Resources  vs.  Bunge Limited

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.

Bunge Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Bunge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Golden Agri-Resources and Bunge

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

The idea behind Golden Agri Resources and Bunge Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.