Correlation Between Archer Daniels and Adecoagro

Can any of the company-specific risk be diversified away by investing in both Archer Daniels and Adecoagro 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 Adecoagro 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 Adecoagro SA, you can compare the effects of market volatilities on Archer Daniels and Adecoagro 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 Adecoagro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Adecoagro.

Diversification Opportunities for Archer Daniels and Adecoagro

-0.41

Correlation Coefficient

Archer Daniels  Adecoagro

Very good diversification

The 3 months correlation between Archer and Adecoagro is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA 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 Adecoagro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecoagro SA has no effect on the direction of Archer Daniels i.e., Archer Daniels and Adecoagro go up and down completely randomly.

Pair Corralation between Archer Daniels and Adecoagro

Considering the 90-day investment horizon Archer Daniels Midland is expected to under-perform the Adecoagro. But the stock apears to be less risky and, when comparing its historical volatility, Archer Daniels Midland is 1.01 times less risky than Adecoagro. The stock trades about -0.01 of its potential returns per unit of risk. The Adecoagro SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  934.00  in Adecoagro SA on December 29, 2024 and sell it today you would earn a total of  206.00  from holding Adecoagro SA or generate 22.06% return on investment over 90 days.

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

Archer Daniels Midland  vs.  Adecoagro SA

Archer Daniels Midland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Archer Daniels is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Adecoagro SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Adecoagro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archer Daniels and Adecoagro

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

The idea behind Archer Daniels Midland and Adecoagro SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..