Correlation Between Golden Agri-Resources and China Overseas

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

Diversification Opportunities for Golden Agri-Resources and China Overseas

-0.27

Correlation Coefficient

Golden Agri-Resources  China Overseas

Very good diversification

The 3 months correlation between Golden and China is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land 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 China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Golden Agri-Resources i.e., Golden Agri-Resources and China Overseas go up and down completely randomly.

Pair Corralation between Golden Agri-Resources and China Overseas

Assuming the 90 days horizon Golden Agri Resources is expected to generate 2.74 times more return on investment than China Overseas. However, Golden Agri-Resources is 2.74 times more volatile than China Overseas Land. It trades about 0.05 of its potential returns per unit of risk. China Overseas Land is currently generating about 0.11 per unit of risk. If you would invest  19.00  in Golden Agri Resources on December 29, 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	93.44%
Values	Daily Returns

Golden Agri Resources  vs.  China Overseas Land

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.

China Overseas Land

Risk-Adjusted Performance

OK

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

Pair Trading with Golden Agri-Resources and China Overseas

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

The idea behind Golden Agri Resources and China Overseas Land 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 Global Correlations module to find global opportunities by holding instruments from different markets.