Correlation Between Bunge and Reynaldos Mexican

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

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

Diversification Opportunities for Bunge and Reynaldos Mexican

0.68

Correlation Coefficient

Bunge  Reynaldos Mexican

Poor diversification

The 3 months correlation between Bunge and Reynaldos is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Reynaldos Mexican Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reynaldos Mexican Food 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 Reynaldos Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reynaldos Mexican Food has no effect on the direction of Bunge i.e., Bunge and Reynaldos Mexican go up and down completely randomly.

Pair Corralation between Bunge and Reynaldos Mexican

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.14 times more return on investment than Reynaldos Mexican. However, Bunge Limited is 6.94 times less risky than Reynaldos Mexican. It trades about -0.19 of its potential returns per unit of risk. Reynaldos Mexican Food is currently generating about -0.13 per unit of risk. If you would invest  9,698  in Bunge Limited on September 18, 2024 and sell it today you would lose (1,748) from holding Bunge Limited or give up 18.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Bunge Limited  vs.  Reynaldos Mexican Food

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.

Reynaldos Mexican Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reynaldos Mexican Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bunge and Reynaldos Mexican

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

The idea behind Bunge Limited and Reynaldos Mexican Food 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.