Correlation Between Bunge and DDC Enterprise

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

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

Diversification Opportunities for Bunge and DDC Enterprise

0.84

Correlation Coefficient

Bunge  DDC Enterprise

Very poor diversification

The 3 months correlation between Bunge and DDC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and DDC Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDC Enterprise 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 DDC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDC Enterprise has no effect on the direction of Bunge i.e., Bunge and DDC Enterprise go up and down completely randomly.

Pair Corralation between Bunge and DDC Enterprise

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.24 times more return on investment than DDC Enterprise. However, Bunge Limited is 4.12 times less risky than DDC Enterprise. It trades about -0.4 of its potential returns per unit of risk. DDC Enterprise Limited is currently generating about -0.18 per unit of risk. If you would invest  8,844  in Bunge Limited on September 25, 2024 and sell it today you would lose (934.00) from holding Bunge Limited or give up 10.56% of portfolio value over 90 days.

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

Bunge Limited  vs.  DDC Enterprise Limited

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 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

DDC Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DDC Enterprise Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bunge and DDC Enterprise

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

The idea behind Bunge Limited and DDC Enterprise 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.