Correlation Between Golden Agri and Australian Agricultural

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

Diversification Opportunities for Golden Agri and Australian Agricultural

0.34

Correlation Coefficient

Golden Agri  Australian Agricultural

Weak diversification

The 3 months correlation between Golden and Australian is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Golden Agri i.e., Golden Agri and Australian Agricultural go up and down completely randomly.

Pair Corralation between Golden Agri and Australian Agricultural

If you would invest  2,080  in Golden Agri Resources on October 20, 2024 and sell it today you would earn a total of  0.00  from holding Golden Agri Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Golden Agri Resources  vs.  Australian Agricultural

Golden Agri Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Agri Resources has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Golden Agri and Australian Agricultural

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

The idea behind Golden Agri Resources and Australian Agricultural 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.