Correlation Between Bunge and Healthy Choice

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

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

Diversification Opportunities for Bunge and Healthy Choice

0.83

Correlation Coefficient

Bunge  Healthy Choice

Very poor diversification

The 3 months correlation between Bunge and Healthy is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Healthy Choice Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthy Choice Wellness 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 Healthy Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthy Choice Wellness has no effect on the direction of Bunge i.e., Bunge and Healthy Choice go up and down completely randomly.

Pair Corralation between Bunge and Healthy Choice

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Healthy Choice. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 10.45 times less risky than Healthy Choice. The stock trades about -0.49 of its potential returns per unit of risk. The Healthy Choice Wellness is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Healthy Choice Wellness on October 8, 2024 and sell it today you would lose (22.00) from holding Healthy Choice Wellness or give up 16.67% 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.  Healthy Choice Wellness

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

Healthy Choice Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bunge and Healthy Choice

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

The idea behind Bunge Limited and Healthy Choice Wellness 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.