Correlation Between SW Seed and GrainCorp
Can any of the company-specific risk be diversified away by investing in both SW Seed and GrainCorp 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 SW Seed and GrainCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SW Seed Company and GrainCorp Limited, you can compare the effects of market volatilities on SW Seed and GrainCorp 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 SW Seed with a short position of GrainCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SW Seed and GrainCorp.
Diversification Opportunities for SW Seed and GrainCorp
Pay attention - limited upside
The 3 months correlation between SANW and GrainCorp is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding SW Seed Company and GrainCorp Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrainCorp Limited and SW Seed 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 SW Seed Company are associated (or correlated) with GrainCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrainCorp Limited has no effect on the direction of SW Seed i.e., SW Seed and GrainCorp go up and down completely randomly.
Pair Corralation between SW Seed and GrainCorp
Given the investment horizon of 90 days SW Seed Company is expected to generate 2.48 times more return on investment than GrainCorp. However, SW Seed is 2.48 times more volatile than GrainCorp Limited. It trades about 0.18 of its potential returns per unit of risk. GrainCorp Limited is currently generating about 0.02 per unit of risk. If you would invest 707.00 in SW Seed Company on October 26, 2024 and sell it today you would earn a total of 232.00 from holding SW Seed Company or generate 32.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
SW Seed Company vs. GrainCorp Limited
Performance |
| Timeline |
| SW Seed Company |
| GrainCorp Limited |
SW Seed and GrainCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SW Seed and GrainCorp
The main advantage of trading using opposite SW Seed and GrainCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SW Seed position performs unexpectedly, GrainCorp 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 GrainCorp will offset losses from the drop in GrainCorp's long position.The idea behind SW Seed Company and GrainCorp Limited 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.| GrainCorp vs. Australian Agricultural | GrainCorp vs. Forafric Global PLC | GrainCorp vs. Forafric Global PLC |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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