Correlation Between Adecoagro and Pilgrims Pride

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

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

Diversification Opportunities for Adecoagro and Pilgrims Pride

0.78

Correlation Coefficient

Adecoagro  Pilgrims Pride

Poor diversification

The 3 months correlation between Adecoagro and Pilgrims is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA and Pilgrims Pride Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilgrims Pride Corp 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 Pilgrims Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilgrims Pride Corp has no effect on the direction of Adecoagro i.e., Adecoagro and Pilgrims Pride go up and down completely randomly.

Pair Corralation between Adecoagro and Pilgrims Pride

Given the investment horizon of 90 days Adecoagro SA is expected to generate 0.84 times more return on investment than Pilgrims Pride. However, Adecoagro SA is 1.19 times less risky than Pilgrims Pride. It trades about 0.18 of its potential returns per unit of risk. Pilgrims Pride Corp is currently generating about 0.13 per unit of risk. If you would invest  934.00  in Adecoagro SA on December 30, 2024 and sell it today you would earn a total of  202.00  from holding Adecoagro SA or generate 21.63% return on investment over 90 days.

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

Adecoagro SA  vs.  Pilgrims Pride Corp

Adecoagro SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 13 (%) 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.

Pilgrims Pride Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pilgrims Pride exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adecoagro and Pilgrims Pride

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

The idea behind Adecoagro SA and Pilgrims Pride Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.