Correlation Between Bunge and Natures Sunshine

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

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

Diversification Opportunities for Bunge and Natures Sunshine

0.78

Correlation Coefficient

Bunge  Natures Sunshine

Poor diversification

The 3 months correlation between Bunge and Natures is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Natures Sunshine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Sunshine Products 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 Natures Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Sunshine Products has no effect on the direction of Bunge i.e., Bunge and Natures Sunshine go up and down completely randomly.

Pair Corralation between Bunge and Natures Sunshine

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Natures Sunshine. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.26 times less risky than Natures Sunshine. The stock trades about -0.18 of its potential returns per unit of risk. The Natures Sunshine Products is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,624  in Natures Sunshine Products on November 28, 2024 and sell it today you would lose (189.00) from holding Natures Sunshine Products or give up 11.64% of portfolio value over 90 days.

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

Bunge Limited  vs.  Natures Sunshine Products

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.

Natures Sunshine Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natures Sunshine Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Bunge and Natures Sunshine

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

The idea behind Bunge Limited and Natures Sunshine Products 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.