Correlation Between Bunge and Tootsie Roll
Can any of the company-specific risk be diversified away by investing in both Bunge and Tootsie Roll 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 Tootsie Roll into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Tootsie Roll Industries, you can compare the effects of market volatilities on Bunge and Tootsie Roll 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 Tootsie Roll. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Tootsie Roll.
Diversification Opportunities for Bunge and Tootsie Roll
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bunge and Tootsie is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Tootsie Roll Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tootsie Roll Industries 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 Tootsie Roll. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tootsie Roll Industries has no effect on the direction of Bunge i.e., Bunge and Tootsie Roll go up and down completely randomly.
Pair Corralation between Bunge and Tootsie Roll
Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Tootsie Roll. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.02 times less risky than Tootsie Roll. The stock trades about -0.04 of its potential returns per unit of risk. The Tootsie Roll Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,073 in Tootsie Roll Industries on December 18, 2024 and sell it today you would earn a total of 59.00 from holding Tootsie Roll Industries or generate 1.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Bunge Limited vs. Tootsie Roll Industries
Performance |
Timeline |
Bunge Limited |
Tootsie Roll Industries |
Bunge and Tootsie Roll Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bunge and Tootsie Roll
The main advantage of trading using opposite Bunge and Tootsie Roll positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, Tootsie Roll 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 Tootsie Roll will offset losses from the drop in Tootsie Roll's long position.The idea behind Bunge Limited and Tootsie Roll Industries 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.Tootsie Roll vs. Mondelez International | Tootsie Roll vs. Hershey Co | Tootsie Roll vs. Rocky Mountain Chocolate | Tootsie Roll vs. Chocoladefabriken Lindt Sprngli |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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