Correlation Between Golden Agri-Resources and Energy

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

Diversification Opportunities for Golden Agri-Resources and Energy

-0.01

Correlation Coefficient

Golden Agri-Resources  Energy

Good diversification

The 3 months correlation between Golden and Energy is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Golden Agri-Resources i.e., Golden Agri-Resources and Energy go up and down completely randomly.

Pair Corralation between Golden Agri-Resources and Energy

Assuming the 90 days horizon Golden Agri-Resources is expected to generate 10.7 times less return on investment than Energy. But when comparing it to its historical volatility, Golden Agri Resources is 1.5 times less risky than Energy. It trades about 0.02 of its potential returns per unit of risk. Energy and Water is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.17  in Energy and Water on December 1, 2024 and sell it today you would earn a total of  0.15  from holding Energy and Water or generate 88.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.67%
Values	Daily Returns

Golden Agri Resources  vs.  Energy and Water

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.

Energy and Water

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy and Water are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Agri-Resources and Energy

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

The idea behind Golden Agri Resources and Energy and Water 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 Stocks Directory module to find actively traded stocks across global markets.