Correlation Between Golden Agri-Resources and SW Seed

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

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

Diversification Opportunities for Golden Agri-Resources and SW Seed

-0.55

Correlation Coefficient

Golden Agri-Resources  SW Seed

Excellent diversification

The 3 months correlation between Golden and SANW is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and SW Seed Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SW Seed Company and Golden Agri-Resources 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 Agri Resources are associated (or correlated) with SW Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SW Seed Company has no effect on the direction of Golden Agri-Resources i.e., Golden Agri-Resources and SW Seed go up and down completely randomly.

Pair Corralation between Golden Agri-Resources and SW Seed

Assuming the 90 days horizon Golden Agri Resources is expected to generate 0.12 times more return on investment than SW Seed. However, Golden Agri Resources is 8.22 times less risky than SW Seed. It trades about 0.21 of its potential returns per unit of risk. SW Seed Company is currently generating about -0.36 per unit of risk. If you would invest  2,062  in Golden Agri Resources on August 12, 2024 and sell it today you would earn a total of  68.00  from holding Golden Agri Resources or generate 3.3% return on investment over 90 days.

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

Golden Agri Resources  vs.  SW Seed Company

Golden Agri Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Golden Agri-Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.

SW Seed Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SW Seed Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Golden Agri-Resources and SW Seed

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

The idea behind Golden Agri Resources and SW Seed Company 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.