Correlation Between Golden Agri and Edible Garden

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

Diversification Opportunities for Golden Agri and Edible Garden

-0.3

Correlation Coefficient

Golden Agri  Edible Garden

Very good diversification

The 3 months correlation between Golden and Edible is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Edible Garden AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edible Garden AG 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 Edible Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edible Garden AG has no effect on the direction of Golden Agri i.e., Golden Agri and Edible Garden go up and down completely randomly.

Pair Corralation between Golden Agri and Edible Garden

Assuming the 90 days horizon Golden Agri Resources is expected to under-perform the Edible Garden. But the pink sheet apears to be less risky and, when comparing its historical volatility, Golden Agri Resources is 13.12 times less risky than Edible Garden. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Edible Garden AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2.76  in Edible Garden AG on December 20, 2024 and sell it today you would earn a total of  2.26  from holding Edible Garden AG or generate 81.88% 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.  Edible Garden AG

Golden Agri Resources

Risk-Adjusted Performance

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Edible Garden AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Edible Garden showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Agri and Edible Garden

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

The idea behind Golden Agri Resources and Edible Garden AG 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.