Correlation Between Golden Agri-Resources and Wilmar International

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

Diversification Opportunities for Golden Agri-Resources and Wilmar International

0.27

Correlation Coefficient

Golden Agri-Resources  Wilmar International

Modest diversification

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

Pair Corralation between Golden Agri-Resources and Wilmar International

Assuming the 90 days horizon Golden Agri Resources is expected to under-perform the Wilmar International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Golden Agri Resources is 1.9 times less risky than Wilmar International. The pink sheet trades about -0.32 of its potential returns per unit of risk. The Wilmar International is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,463  in Wilmar International on September 1, 2024 and sell it today you would lose (161.00) from holding Wilmar International or give up 6.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Golden Agri Resources  vs.  Wilmar International

Golden Agri Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 6 (%) 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.

Wilmar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmar International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Wilmar International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Golden Agri-Resources and Wilmar International

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

The idea behind Golden Agri Resources and Wilmar International 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.