Correlation Between Bunge and Brasilagro Adr

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

By analyzing existing cross correlation between Bunge Limited and Brasilagro Adr, you can compare the effects of market volatilities on Bunge and Brasilagro Adr 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 Bunge with a short position of Brasilagro Adr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Brasilagro Adr.

Diversification Opportunities for Bunge and Brasilagro Adr

-0.22

Correlation Coefficient

Bunge  Brasilagro Adr

Very good diversification

The 3 months correlation between Bunge and Brasilagro is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Brasilagro Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brasilagro Adr and Bunge 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 Bunge Limited are associated (or correlated) with Brasilagro Adr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brasilagro Adr has no effect on the direction of Bunge i.e., Bunge and Brasilagro Adr go up and down completely randomly.

Pair Corralation between Bunge and Brasilagro Adr

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.77 times more return on investment than Brasilagro Adr. However, Bunge Limited is 1.3 times less risky than Brasilagro Adr. It trades about 0.29 of its potential returns per unit of risk. Brasilagro Adr is currently generating about 0.05 per unit of risk. If you would invest  9,776  in Bunge Limited on January 19, 2024 and sell it today you would earn a total of  776.00  from holding Bunge Limited or generate 7.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Bunge Limited  vs.  Brasilagro Adr

Bunge Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bunge reported solid returns over the last few months and may actually be approaching a breakup point.

Brasilagro Adr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brasilagro Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Brasilagro Adr is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bunge and Brasilagro Adr

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

The idea behind Bunge Limited and Brasilagro Adr 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.