Correlation Between Bunge and Primo Brands

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

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

Diversification Opportunities for Bunge and Primo Brands

-0.74

Correlation Coefficient

Bunge  Primo Brands

Pay attention - limited upside

The 3 months correlation between Bunge and Primo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands 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 Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of Bunge i.e., Bunge and Primo Brands go up and down completely randomly.

Pair Corralation between Bunge and Primo Brands

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Primo Brands. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.13 times less risky than Primo Brands. The stock trades about -0.35 of its potential returns per unit of risk. The Primo Brands is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,053  in Primo Brands on October 7, 2024 and sell it today you would earn a total of  54.00  from holding Primo Brands or generate 1.77% return on investment over 90 days.

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

Bunge Limited  vs.  Primo Brands

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.

Primo Brands

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bunge and Primo Brands

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

The idea behind Bunge Limited and Primo Brands 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.