Correlation Between Adecoagro and British Amer

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

By analyzing existing cross correlation between Adecoagro SA and British American Tobacco, you can compare the effects of market volatilities on Adecoagro and British Amer 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 Adecoagro with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adecoagro and British Amer.

Diversification Opportunities for Adecoagro and British Amer

0.13

Correlation Coefficient

Adecoagro  British Amer

Average diversification

The 3 months correlation between Adecoagro and British is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Adecoagro 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 Adecoagro SA are associated (or correlated) with British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Adecoagro i.e., Adecoagro and British Amer go up and down completely randomly.

Pair Corralation between Adecoagro and British Amer

Given the investment horizon of 90 days Adecoagro SA is expected to generate 2.43 times more return on investment than British Amer. However, Adecoagro is 2.43 times more volatile than British American Tobacco. It trades about 0.08 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.08 per unit of risk. If you would invest  1,079  in Adecoagro SA on January 25, 2024 and sell it today you would earn a total of  35.00  from holding Adecoagro SA or generate 3.24% return on investment over 90 days.

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

Adecoagro SA  vs.  British American Tobacco

Adecoagro SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Adecoagro may actually be approaching a critical reversion point that can send shares even higher in May 2024.

British American Tobacco

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Adecoagro and British Amer

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

The idea behind Adecoagro SA and British American Tobacco 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.