Correlation Between Bunge and Vita Coco

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

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

Diversification Opportunities for Bunge and Vita Coco

-0.32

Correlation Coefficient

Bunge  Vita Coco

Very good diversification

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

Pair Corralation between Bunge and Vita Coco

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.55 times more return on investment than Vita Coco. However, Bunge Limited is 1.81 times less risky than Vita Coco. It trades about -0.04 of its potential returns per unit of risk. Vita Coco is currently generating about -0.06 per unit of risk. If you would invest  7,732  in Bunge Limited on December 27, 2024 and sell it today you would lose (387.00) from holding Bunge Limited or give up 5.01% of portfolio value over 90 days.

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

Bunge Limited  vs.  Vita Coco

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 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.

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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.

Pair Trading with Bunge and Vita Coco

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

The idea behind Bunge Limited and Vita Coco 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.