Correlation Between Alico and Bunge

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

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

Diversification Opportunities for Alico and Bunge

0.77

Correlation Coefficient

Alico  Bunge

Poor diversification

The 3 months correlation between Alico and Bunge is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Alico 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 Alico Inc 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 Alico i.e., Alico and Bunge go up and down completely randomly.

Pair Corralation between Alico and Bunge

Given the investment horizon of 90 days Alico Inc is expected to generate 1.54 times more return on investment than Bunge. However, Alico is 1.54 times more volatile than Bunge Limited. It trades about -0.05 of its potential returns per unit of risk. Bunge Limited is currently generating about -0.12 per unit of risk. If you would invest  2,925  in Alico Inc on August 30, 2024 and sell it today you would lose (259.00) from holding Alico Inc or give up 8.85% of portfolio value over 90 days.

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

Alico Inc  vs.  Bunge Limited

Alico Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alico Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Bunge Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alico and Bunge

The main advantage of trading using opposite Alico and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alico 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 Alico Inc 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.