Correlation Between Golden Agri-Resources and Sitio Royalties

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

Diversification Opportunities for Golden Agri-Resources and Sitio Royalties

0.08

Correlation Coefficient

Golden Agri-Resources  Sitio Royalties

Significant diversification

The 3 months correlation between Golden and Sitio is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Sitio Royalties Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitio Royalties Corp 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 Sitio Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitio Royalties Corp has no effect on the direction of Golden Agri-Resources i.e., Golden Agri-Resources and Sitio Royalties go up and down completely randomly.

Pair Corralation between Golden Agri-Resources and Sitio Royalties

Assuming the 90 days horizon Golden Agri Resources is expected to generate 4.57 times more return on investment than Sitio Royalties. However, Golden Agri-Resources is 4.57 times more volatile than Sitio Royalties Corp. It trades about 0.05 of its potential returns per unit of risk. Sitio Royalties Corp is currently generating about 0.1 per unit of risk. If you would invest  19.00  in Golden Agri Resources on December 28, 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 Together
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Golden Agri Resources  vs.  Sitio Royalties Corp

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.

Sitio Royalties Corp

Risk-Adjusted Performance

OK

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

Pair Trading with Golden Agri-Resources and Sitio Royalties

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

The idea behind Golden Agri Resources and Sitio Royalties Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.