Correlation Between Archer Daniels and Bumitama Agri

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

By analyzing existing cross correlation between Archer Daniels Midland and Bumitama Agri, you can compare the effects of market volatilities on Archer Daniels and Bumitama Agri 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 Archer Daniels with a short position of Bumitama Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Bumitama Agri.

Diversification Opportunities for Archer Daniels and Bumitama Agri

-0.74

Correlation Coefficient

Archer Daniels  Bumitama Agri

Pay attention - limited upside

The 3 months correlation between Archer and Bumitama is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Bumitama Agri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumitama Agri and Archer Daniels 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 Archer Daniels Midland are associated (or correlated) with Bumitama Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumitama Agri has no effect on the direction of Archer Daniels i.e., Archer Daniels and Bumitama Agri go up and down completely randomly.

Pair Corralation between Archer Daniels and Bumitama Agri

Assuming the 90 days horizon Archer Daniels Midland is expected to under-perform the Bumitama Agri. But the stock apears to be less risky and, when comparing its historical volatility, Archer Daniels Midland is 1.34 times less risky than Bumitama Agri. The stock trades about -0.06 of its potential returns per unit of risk. The Bumitama Agri is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  49.00  in Bumitama Agri on September 15, 2024 and sell it today you would earn a total of  13.00  from holding Bumitama Agri or generate 26.53% return on investment over 90 days.

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

Archer Daniels Midland  vs.  Bumitama Agri

Archer Daniels Midland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bumitama Agri

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bumitama Agri are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bumitama Agri reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archer Daniels and Bumitama Agri

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

The idea behind Archer Daniels Midland and Bumitama Agri 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.