Correlation Between Bunge and SalMar ASA

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

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

Diversification Opportunities for Bunge and SalMar ASA

-0.02

Correlation Coefficient

Bunge  SalMar ASA

Good diversification

The 3 months correlation between Bunge and SalMar is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA 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 SalMar ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalMar ASA has no effect on the direction of Bunge i.e., Bunge and SalMar ASA go up and down completely randomly.

Pair Corralation between Bunge and SalMar ASA

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the SalMar ASA. In addition to that, Bunge is 5.56 times more volatile than SalMar ASA. It trades about -0.12 of its total potential returns per unit of risk. SalMar ASA is currently generating about 0.12 per unit of volatility. If you would invest  5,000  in SalMar ASA on September 4, 2024 and sell it today you would earn a total of  106.00  from holding SalMar ASA or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Bunge Limited  vs.  SalMar ASA

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SalMar ASA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SalMar ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SalMar ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bunge and SalMar ASA

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

The idea behind Bunge Limited and SalMar ASA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.