Correlation Between Forafric Global and Australian Agricultural

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

By analyzing existing cross correlation between Forafric Global PLC and Australian Agricultural, you can compare the effects of market volatilities on Forafric Global and Australian Agricultural 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 Forafric Global with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forafric Global and Australian Agricultural.

Diversification Opportunities for Forafric Global and Australian Agricultural

0.59

Correlation Coefficient

Forafric Global  Australian Agricultural

Very weak diversification

The 3 months correlation between Forafric and Australian is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Forafric Global PLC and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and Forafric Global 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 Forafric Global PLC are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Forafric Global i.e., Forafric Global and Australian Agricultural go up and down completely randomly.

Pair Corralation between Forafric Global and Australian Agricultural

Given the investment horizon of 90 days Forafric Global is expected to generate 3.13 times less return on investment than Australian Agricultural. But when comparing it to its historical volatility, Forafric Global PLC is 1.48 times less risky than Australian Agricultural. It trades about 0.04 of its potential returns per unit of risk. Australian Agricultural is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Australian Agricultural on March 28, 2024 and sell it today you would earn a total of  7.00  from holding Australian Agricultural or generate 7.78% return on investment over 90 days.

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

Forafric Global PLC  vs.  Australian Agricultural

Forafric Global PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Forafric Global PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Forafric Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Australian Agricultural

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Australian Agricultural may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Forafric Global and Australian Agricultural

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

The idea behind Forafric Global PLC and Australian Agricultural 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.