Correlation Between Golden Agri-Resources and UDR

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

Diversification Opportunities for Golden Agri-Resources and UDR

0.03

Correlation Coefficient

Golden Agri-Resources  UDR

Significant diversification

The 3 months correlation between Golden and UDR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and UDR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UDR Inc 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 UDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UDR Inc has no effect on the direction of Golden Agri-Resources i.e., Golden Agri-Resources and UDR go up and down completely randomly.

Pair Corralation between Golden Agri-Resources and UDR

Assuming the 90 days horizon Golden Agri Resources is expected to generate 9.65 times more return on investment than UDR. However, Golden Agri-Resources is 9.65 times more volatile than UDR Inc. It trades about 0.02 of its potential returns per unit of risk. UDR Inc is currently generating about -0.02 per unit of risk. If you would invest  17.00  in Golden Agri Resources on November 29, 2024 and sell it today you would lose (3.00) from holding Golden Agri Resources or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.33%
Values	Daily Returns

Golden Agri Resources  vs.  UDR Inc

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.

UDR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days UDR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, UDR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Golden Agri-Resources and UDR

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

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