Correlation Between Adecoagro and Bunge

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

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

Diversification Opportunities for Adecoagro and Bunge

-0.32

Correlation Coefficient

Adecoagro  Bunge

Very good diversification

The 3 months correlation between Adecoagro and Bunge is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited 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 Bunge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunge Limited has no effect on the direction of Adecoagro i.e., Adecoagro and Bunge go up and down completely randomly.

Pair Corralation between Adecoagro and Bunge

Given the investment horizon of 90 days Adecoagro SA is expected to generate 1.1 times more return on investment than Bunge. However, Adecoagro is 1.1 times more volatile than Bunge Limited. It trades about 0.18 of its potential returns per unit of risk. Bunge Limited is currently generating about 0.01 per unit of risk. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Adecoagro SA  vs.  Bunge Limited

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.

Bunge Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Bunge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Adecoagro and Bunge

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

The idea behind Adecoagro SA and Bunge 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.