Correlation Between Golden Agri and Archer Daniels

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

Diversification Opportunities for Golden Agri and Archer Daniels

-0.15

Correlation Coefficient

Golden Agri  Archer Daniels

Good diversification

The 3 months correlation between Golden and Archer is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of Golden Agri i.e., Golden Agri and Archer Daniels go up and down completely randomly.

Pair Corralation between Golden Agri and Archer Daniels

Assuming the 90 days horizon Golden Agri Resources is expected to generate 0.7 times more return on investment than Archer Daniels. However, Golden Agri Resources is 1.42 times less risky than Archer Daniels. It trades about 0.03 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about -0.13 per unit of risk. If you would invest  2,050  in Golden Agri Resources on September 14, 2024 and sell it today you would earn a total of  30.00  from holding Golden Agri Resources or generate 1.46% return on investment over 90 days.

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

Golden Agri Resources  vs.  Archer Daniels Midland

Golden Agri Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Golden Agri is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Archer Daniels Midland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Golden Agri and Archer Daniels

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

The idea behind Golden Agri Resources and Archer Daniels Midland 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.