Correlation Between GrainCorp and Atlantic Sapphire

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Can any of the company-specific risk be diversified away by investing in both GrainCorp and Atlantic Sapphire 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 GrainCorp and Atlantic Sapphire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GrainCorp Limited and Atlantic Sapphire ASA, you can compare the effects of market volatilities on GrainCorp and Atlantic Sapphire 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 GrainCorp with a short position of Atlantic Sapphire. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrainCorp and Atlantic Sapphire.

Diversification Opportunities for GrainCorp and Atlantic Sapphire

GrainCorpAtlanticDiversified AwayGrainCorpAtlanticDiversified Away100%
0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between GrainCorp and Atlantic is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GrainCorp Limited and Atlantic Sapphire ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic Sapphire ASA and GrainCorp 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 GrainCorp Limited are associated (or correlated) with Atlantic Sapphire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic Sapphire ASA has no effect on the direction of GrainCorp i.e., GrainCorp and Atlantic Sapphire go up and down completely randomly.

Pair Corralation between GrainCorp and Atlantic Sapphire

Assuming the 90 days horizon GrainCorp Limited is expected to under-perform the Atlantic Sapphire. But the pink sheet apears to be less risky and, when comparing its historical volatility, GrainCorp Limited is 6.65 times less risky than Atlantic Sapphire. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Atlantic Sapphire ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3.38  in Atlantic Sapphire ASA on September 15, 2024 and sell it today you would lose (2.46) from holding Atlantic Sapphire ASA or give up 72.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

GrainCorp Limited  vs.  Atlantic Sapphire ASA

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -50050100
JavaScript chart by amCharts 3.21.15GRCLF AASZF
       Timeline  
GrainCorp Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days GrainCorp Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4.555.56
Atlantic Sapphire ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Atlantic Sapphire ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Atlantic Sapphire may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec0.010.020.030.040.050.060.070.08

GrainCorp and Atlantic Sapphire Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.67-4.25-2.82-1.40.01.242.493.755.0 0.0050.0100.0150.0200.0250.0300.035
JavaScript chart by amCharts 3.21.15GRCLF AASZF
       Returns  

Pair Trading with GrainCorp and Atlantic Sapphire

The main advantage of trading using opposite GrainCorp and Atlantic Sapphire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrainCorp position performs unexpectedly, Atlantic Sapphire 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 Atlantic Sapphire will offset losses from the drop in Atlantic Sapphire's long position.
The idea behind GrainCorp Limited and Atlantic Sapphire ASA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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