Correlation Between International Agricultural and General Silos

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

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

Diversification Opportunities for International Agricultural and General Silos

0.75

Correlation Coefficient

International Agricultural  General Silos

Poor diversification

The 3 months correlation between International and General is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding International Agricultural Pro and General Silos Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Silos Storage and International Agricultural 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 International Agricultural Products are associated (or correlated) with General Silos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Silos Storage has no effect on the direction of International Agricultural i.e., International Agricultural and General Silos go up and down completely randomly.

Pair Corralation between International Agricultural and General Silos

Assuming the 90 days trading horizon International Agricultural Products is expected to generate 0.76 times more return on investment than General Silos. However, International Agricultural Products is 1.32 times less risky than General Silos. It trades about 0.18 of its potential returns per unit of risk. General Silos Storage is currently generating about 0.03 per unit of risk. If you would invest  1,207  in International Agricultural Products on September 27, 2024 and sell it today you would earn a total of  665.00  from holding International Agricultural Products or generate 55.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.02%
Values	Daily Returns

International Agricultural Pro  vs.  General Silos Storage

International Agricultural

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Agricultural Products are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, International Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

General Silos Storage

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Silos Storage are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, General Silos reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Agricultural and General Silos

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

The idea behind International Agricultural Products and General Silos Storage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.