Correlation Between Brasilagro Adr and Golden Agri-Resources

Can any of the company-specific risk be diversified away by investing in both Brasilagro Adr and Golden Agri-Resources 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 Brasilagro Adr and Golden Agri-Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brasilagro Adr and Golden Agri Resources, you can compare the effects of market volatilities on Brasilagro Adr and Golden Agri-Resources 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 Brasilagro Adr with a short position of Golden Agri-Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brasilagro Adr and Golden Agri-Resources.

Diversification Opportunities for Brasilagro Adr and Golden Agri-Resources

0.18

Correlation Coefficient

Brasilagro Adr  Golden Agri-Resources

Average diversification

The 3 months correlation between Brasilagro and Golden is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Brasilagro Adr and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources and Brasilagro Adr 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 Brasilagro Adr are associated (or correlated) with Golden Agri-Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of Brasilagro Adr i.e., Brasilagro Adr and Golden Agri-Resources go up and down completely randomly.

Pair Corralation between Brasilagro Adr and Golden Agri-Resources

Considering the 90-day investment horizon Brasilagro Adr is expected to under-perform the Golden Agri-Resources. But the stock apears to be less risky and, when comparing its historical volatility, Brasilagro Adr is 8.17 times less risky than Golden Agri-Resources. The stock trades about -0.14 of its potential returns per unit of risk. The Golden Agri Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Golden Agri Resources on November 29, 2024 and sell it today you would lose (3.00) from holding Golden Agri Resources or give up 17.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.33%
Values	Daily Returns

Brasilagro Adr  vs.  Golden Agri Resources

Brasilagro Adr

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brasilagro Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Golden Agri Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Golden Agri-Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brasilagro Adr and Golden Agri-Resources

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

The idea behind Brasilagro Adr and Golden Agri Resources 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.