Correlation Between JM Smucker and Golden Agri

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

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

Diversification Opportunities for JM Smucker and Golden Agri

0.19

Correlation Coefficient

JM Smucker  Golden Agri

Average diversification

The 3 months correlation between SJM and Golden is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker 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 JM Smucker 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 JM Smucker 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 JM Smucker i.e., JM Smucker and Golden Agri go up and down completely randomly.

Pair Corralation between JM Smucker and Golden Agri

Considering the 90-day investment horizon JM Smucker is expected to generate 1.24 times less return on investment than Golden Agri. But when comparing it to its historical volatility, JM Smucker is 2.64 times less risky than Golden Agri. It trades about 0.19 of its potential returns per unit of risk. 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 12, 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

JM Smucker  vs.  Golden Agri Resources

JM Smucker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 weak basic indicators, Golden Agri reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JM Smucker and Golden Agri

The main advantage of trading using opposite JM Smucker and Golden Agri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker 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 JM Smucker 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 Commodity Directory module to find actively traded commodities issued by global exchanges.