Correlation Between Bunge and Ingredion Incorporated

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

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

Diversification Opportunities for Bunge and Ingredion Incorporated

-0.43

Correlation Coefficient

Bunge  Ingredion Incorporated

Very good diversification

The 3 months correlation between Bunge and Ingredion is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Ingredion Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingredion Incorporated 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 Ingredion Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingredion Incorporated has no effect on the direction of Bunge i.e., Bunge and Ingredion Incorporated go up and down completely randomly.

Pair Corralation between Bunge and Ingredion Incorporated

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Ingredion Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.14 times less risky than Ingredion Incorporated. The stock trades about -0.14 of its potential returns per unit of risk. The Ingredion Incorporated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11,337  in Ingredion Incorporated on September 25, 2024 and sell it today you would earn a total of  2,596  from holding Ingredion Incorporated or generate 22.9% return on investment over 90 days.

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

Bunge Limited  vs.  Ingredion Incorporated

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.

Ingredion Incorporated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ingredion Incorporated are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Ingredion Incorporated is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bunge and Ingredion Incorporated

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

The idea behind Bunge Limited and Ingredion Incorporated 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.