Correlation Between Bunge and Wilmar International

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

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

Diversification Opportunities for Bunge and Wilmar International

0.45

Correlation Coefficient

Bunge  Wilmar International

Very weak diversification

The 3 months correlation between Bunge and Wilmar is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Wilmar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of Bunge i.e., Bunge and Wilmar International go up and down completely randomly.

Pair Corralation between Bunge and Wilmar International

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Wilmar International. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 1.47 times less risky than Wilmar International. The stock trades about -0.12 of its potential returns per unit of risk. The Wilmar International is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Wilmar International on September 4, 2024 and sell it today you would lose (127.00) from holding Wilmar International or give up 5.23% of portfolio value over 90 days.

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

Bunge Limited  vs.  Wilmar International

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.

Wilmar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmar International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Wilmar International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bunge and Wilmar International

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

The idea behind Bunge Limited and Wilmar International 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.