Correlation Between Golden Agri and Limoneira

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

Diversification Opportunities for Golden Agri and Limoneira

0.57

Correlation Coefficient

Golden Agri  Limoneira

Very weak diversification

The 3 months correlation between Golden and Limoneira is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Limoneira Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limoneira and Golden Agri 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 Limoneira. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limoneira has no effect on the direction of Golden Agri i.e., Golden Agri and Limoneira go up and down completely randomly.

Pair Corralation between Golden Agri and Limoneira

Assuming the 90 days horizon Golden Agri is expected to generate 2.09 times less return on investment than Limoneira. In addition to that, Golden Agri is 2.14 times more volatile than Limoneira Co. It trades about 0.02 of its total potential returns per unit of risk. Limoneira Co is currently generating about 0.09 per unit of volatility. If you would invest  2,467  in Limoneira Co on September 5, 2024 and sell it today you would earn a total of  262.00  from holding Limoneira Co or generate 10.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Golden Agri Resources  vs.  Limoneira Co

Golden Agri Resources

Risk-Adjusted Performance

1 of 100

Modest

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 stable basic indicators, Golden Agri is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Limoneira

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Limoneira Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Limoneira may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Golden Agri and Limoneira

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

The idea behind Golden Agri Resources and Limoneira Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.