Correlation Between Bunge and Seaboard

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

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

Diversification Opportunities for Bunge and Seaboard

-0.55

Correlation Coefficient

Bunge  Seaboard

Excellent diversification

The 3 months correlation between Bunge and Seaboard is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard 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 Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of Bunge i.e., Bunge and Seaboard go up and down completely randomly.

Pair Corralation between Bunge and Seaboard

Allowing for the 90-day total investment horizon Bunge is expected to generate 9.46 times less return on investment than Seaboard. But when comparing it to its historical volatility, Bunge Limited is 1.45 times less risky than Seaboard. It trades about 0.01 of its potential returns per unit of risk. Seaboard is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  238,911  in Seaboard on December 28, 2024 and sell it today you would earn a total of  27,670  from holding Seaboard or generate 11.58% 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.  Seaboard

Bunge Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Bunge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Seaboard

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seaboard are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Seaboard sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bunge and Seaboard

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

The idea behind Bunge Limited and Seaboard 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.