Correlation Between Bunge and Adecoagro

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

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

Diversification Opportunities for Bunge and Adecoagro

0.83

Correlation Coefficient

Bunge  Adecoagro

Very poor diversification

The 3 months correlation between Bunge and Adecoagro is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA and Bunge 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 Bunge Limited 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 Bunge i.e., Bunge and Adecoagro go up and down completely randomly.

Pair Corralation between Bunge and Adecoagro

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Adecoagro. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.28 times less risky than Adecoagro. The stock trades about -0.02 of its potential returns per unit of risk. The Adecoagro SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  761.00  in Adecoagro SA on November 19, 2024 and sell it today you would earn a total of  218.00  from holding Adecoagro SA or generate 28.65% return on investment over 90 days.

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

Bunge Limited  vs.  Adecoagro SA

Bunge Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Adecoagro SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bunge and Adecoagro

The main advantage of trading using opposite Bunge and Adecoagro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.