Correlation Between Golden Agri and Clean Seas

Can any of the company-specific risk be diversified away by investing in both Golden Agri and Clean Seas 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 and Clean Seas 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 Clean Seas Seafood, you can compare the effects of market volatilities on Golden Agri and Clean Seas 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 with a short position of Clean Seas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Agri and Clean Seas.

Diversification Opportunities for Golden Agri and Clean Seas

0.08

Correlation Coefficient

Golden Agri  Clean Seas

Significant diversification

The 3 months correlation between Golden and Clean is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Golden Agri Resources and Clean Seas Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Seas Seafood and Golden Agri 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 Clean Seas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Seas Seafood has no effect on the direction of Golden Agri i.e., Golden Agri and Clean Seas go up and down completely randomly.

Pair Corralation between Golden Agri and Clean Seas

Assuming the 90 days horizon Golden Agri Resources is expected to generate 0.15 times more return on investment than Clean Seas. However, Golden Agri Resources is 6.69 times less risky than Clean Seas. It trades about -0.06 of its potential returns per unit of risk. Clean Seas Seafood is currently generating about -0.22 per unit of risk. If you would invest  2,130  in Golden Agri Resources on September 25, 2024 and sell it today you would lose (50.00) from holding Golden Agri Resources or give up 2.35% of portfolio value over 90 days.

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

Golden Agri Resources  vs.  Clean Seas Seafood

Golden Agri Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Agri Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Golden Agri is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Clean Seas Seafood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Seas Seafood 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Golden Agri and Clean Seas

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

The idea behind Golden Agri Resources and Clean Seas Seafood 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 CEOs Directory module to screen CEOs from public companies around the world.