Correlation Between Farmmi and Golden Agri

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

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

Diversification Opportunities for Farmmi and Golden Agri

-0.18

Correlation Coefficient

Farmmi  Golden Agri

Good diversification

The 3 months correlation between Farmmi and Golden is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc 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 Farmmi 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 Farmmi Inc are associated (or correlated) with Golden Agri. 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 Farmmi i.e., Farmmi and Golden Agri go up and down completely randomly.

Pair Corralation between Farmmi and Golden Agri

Given the investment horizon of 90 days Farmmi Inc is expected to under-perform the Golden Agri. But the stock apears to be less risky and, when comparing its historical volatility, Farmmi Inc is 1.94 times less risky than Golden Agri. The stock trades about -0.12 of its potential returns per unit of risk. The Golden Agri Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Golden Agri Resources on February 13, 2024 and sell it today you would earn a total of  1.00  from holding Golden Agri Resources or generate 5.56% return on investment over 90 days.

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

Farmmi Inc  vs.  Golden Agri Resources

Farmmi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmmi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Golden Agri Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Golden Agri reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmmi and Golden Agri

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

The idea behind Farmmi Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.