Correlation Between Golden Eagle and Provident Agro

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

By analyzing existing cross correlation between Golden Eagle Energy and Provident Agro Tbk, you can compare the effects of market volatilities on Golden Eagle and Provident Agro 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 Eagle with a short position of Provident Agro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Eagle and Provident Agro.

Diversification Opportunities for Golden Eagle and Provident Agro

0.39

Correlation Coefficient

Golden Eagle  Provident Agro

Weak diversification

The 3 months correlation between Golden and Provident is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Golden Eagle Energy and Provident Agro Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Agro Tbk and Golden Eagle 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 Eagle Energy are associated (or correlated) with Provident Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Agro Tbk has no effect on the direction of Golden Eagle i.e., Golden Eagle and Provident Agro go up and down completely randomly.

Pair Corralation between Golden Eagle and Provident Agro

Assuming the 90 days trading horizon Golden Eagle Energy is expected to under-perform the Provident Agro. But the stock apears to be less risky and, when comparing its historical volatility, Golden Eagle Energy is 4.31 times less risky than Provident Agro. The stock trades about -0.34 of its potential returns per unit of risk. The Provident Agro Tbk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  39,800  in Provident Agro Tbk on October 11, 2024 and sell it today you would earn a total of  200.00  from holding Provident Agro Tbk or generate 0.5% return on investment over 90 days.

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

Golden Eagle Energy  vs.  Provident Agro Tbk

Golden Eagle Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Eagle Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Provident Agro Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Provident Agro Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Provident Agro is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Golden Eagle and Provident Agro

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

The idea behind Golden Eagle Energy and Provident Agro Tbk 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.