Correlation Between African Agriculture and CHS
Can any of the company-specific risk be diversified away by investing in both African Agriculture and CHS 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 African Agriculture and CHS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Agriculture Holdings and CHS Inc CP, you can compare the effects of market volatilities on African Agriculture and CHS 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 African Agriculture with a short position of CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Agriculture and CHS.
Diversification Opportunities for African Agriculture and CHS
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between African and CHS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding African Agriculture Holdings and CHS Inc CP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CP and African Agriculture 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 African Agriculture Holdings are associated (or correlated) with CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CP has no effect on the direction of African Agriculture i.e., African Agriculture and CHS go up and down completely randomly.
Pair Corralation between African Agriculture and CHS
Assuming the 90 days horizon African Agriculture Holdings is expected to generate 35.11 times more return on investment than CHS. However, African Agriculture is 35.11 times more volatile than CHS Inc CP. It trades about 0.06 of its potential returns per unit of risk. CHS Inc CP is currently generating about -0.01 per unit of risk. If you would invest 3.60 in African Agriculture Holdings on September 14, 2024 and sell it today you would lose (3.23) from holding African Agriculture Holdings or give up 89.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 73.79% |
| Values | Daily Returns |
African Agriculture Holdings vs. CHS Inc CP
Performance |
| Timeline |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| CHS Inc CP |
African Agriculture and CHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Agriculture and CHS
The main advantage of trading using opposite African Agriculture and CHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Agriculture position performs unexpectedly, CHS 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 CHS will offset losses from the drop in CHS's long position.| African Agriculture vs. ReTo Eco Solutions | African Agriculture vs. Parker Hannifin | African Agriculture vs. Stepan Company | African Agriculture vs. Consol Energy |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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