Correlation Between GrainCorp and Wilmar International

Can any of the company-specific risk be diversified away by investing in both GrainCorp 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 GrainCorp and Wilmar International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GrainCorp Limited and Wilmar International, you can compare the effects of market volatilities on GrainCorp 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 GrainCorp with a short position of Wilmar International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrainCorp and Wilmar International.

Diversification Opportunities for GrainCorp and Wilmar International

0.8

Correlation Coefficient

GrainCorp  Wilmar International

Very poor diversification

The 3 months correlation between GrainCorp and Wilmar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding GrainCorp Limited and Wilmar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 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 GrainCorp i.e., GrainCorp and Wilmar International go up and down completely randomly.

Pair Corralation between GrainCorp and Wilmar International

Assuming the 90 days horizon GrainCorp Limited is expected to under-perform the Wilmar International. In addition to that, GrainCorp is 1.5 times more volatile than Wilmar International. It trades about -0.08 of its total potential returns per unit of risk. Wilmar International is currently generating about -0.03 per unit of volatility. If you would invest  2,409  in Wilmar International on September 13, 2024 and sell it today you would lose (122.00) from holding Wilmar International or give up 5.06% of portfolio value over 90 days.

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

GrainCorp Limited  vs.  Wilmar International

GrainCorp Limited

Risk-Adjusted Performance

0 of 100

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.

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 GrainCorp and Wilmar International

The main advantage of trading using opposite GrainCorp and Wilmar International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrainCorp 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 GrainCorp Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.